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WTO NEWS: SPEECHES — DG SUPACHAI PANITCHPAKDI

20 January 2005

WTO talks can be ‘a catalyst for growth’, Supachai tells African ministers

Work on the Doha agenda has to intensify, with continued top-level political involvement, Director-General Supachai Panitchpakdi told a meeting of African and Nordic ministers in Tanzania on 20 January 2005. In a wide-ranging speech, titled “the Doha Development Agenda as a catalyst for growth”, he urged African countries to reap potential big gains by taking a longer view in the agriculture negotiations, and he said that the discussion on preference erosion has to reconcile conflicting objectives among developing countries.

The occasion was a ministerial conference in Dar es Salam, 19–20 January 2005, under the Nordic Africa Initiative, in which the Nordic countries aim to strengthened dialogue, and to increase the understanding of how African interests can be met through active and constructive participation by all WTO members in the Doha Round.

This is what he said:

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Your Excellencies, Ladies and Gentlemen,

I would like to thank you for this opportunity to address African and Nordic Ministers. Nordic countries have an impressive record of supporting Africa's development and the objective of this initiative — to strengthen the dialogue on trade and development — is certainly highly commendable. I would also like to thank the Tanzanian authorities for their generous hospitality and excellent arrangements.

As this is my first visit to Africa this year, let me express my sincere thanks to all of you for working hard and providing the leadership we needed to reach agreement at the end of July last year. Your commitment to the multilateral trading system and your close personal involvement were instrumental in putting the Doha Development Agenda back on track. Clearly, the July Decision would not have been possible without the political will of all Members to cast aside entrenched positions. I firmly believe that the July Decision shows that the WTO can deliver and that a strengthened and dynamic multilateral trading system benefits each and every Member.

I do not think that I need to convince you of the importance of trade for development. I know that it is already well understood that trade and the DDA are vitally important to Africa's efforts to unlock the continent's economic potential. It is only the WTO through the DDA that can push through imperative, development-friendly reforms such as the elimination of agricultural export subsidies; substantial reduction in trade-distorting domestic support; and substantial improvements in market access including the reduction of tariff peaks and tariff escalation. It is only the WTO which can improve global rules for the conduct of trade, which is so necessary to complement development and poverty reduction strategies.

As you know, the negotiations have entered a new phase after the adoption of the July Decision. We are now focussing primarily on the technical work which needs to be done in each area to prepare the ground for the next steps in the DDA work programme. Of course, the dividing line between the technical and political is never a precise one. Many important political questions about the future progress of the DDA remain outstanding.

Since July last year, I have had extensive direct contacts with Ministers, particularly in the APEC context but also in a number of bilateral meetings in Europe, Asia and Latin America. I am pleased to report to you that in all these contacts I have found a firm determination at the political level to press on vigorously with the negotiations and ensure that there is no wasted moment in 2005. I am sure you all share this determination. The challenge before us for the new year is how best to put it into practice.

Let me share with you some of the views that I have received on this issue.

First, there is a strong feeling that we need to intensify our work. Despite the positive atmosphere in which the negotiations have been conducted since July, the consistent message that I have received is that we should not be complacent. We must be alert to the monumental tasks that will confront us throughout 2005, if we are to have a successful Hong Kong Ministerial Conference.

Second, it is widely recognized that we need to advance the detailed work in the negotiating bodies but at the same time continue to keep an eye on the big picture. As I have said in Geneva, I believe that it will be timely and appropriate to invite the Trade Negotiations Committee early in 2005 to renew its collective consideration of the way forward for the DDA as a whole. This will help us to keep sight of the overall balance in the DDA and to gain an early understanding of our objectives for 2005, the Hong Kong Ministerial Conference and beyond.

Third, our past experience has shown us that we are best able to make progress when we have the full political involvement of Ministers. We need the help of Ministers to focus effectively on key problems and priorities. We need this involvement to generate the political momentum to make advances in sensitive and difficult areas. It is salutary that there has not been a significant hiatus or transition period after the achievement of the July Decision. The task is now to make full use of this time. The basic and technical work will be done in Geneva but it does need to be guided by Ministerial-level political input.

Fourth, I have heard on many occasions about the need for balanced results. The DDA is a single undertaking and it is clear that we will not be able to conclude this round unless we make progress across the board. A breakthrough in agriculture will unlock the DDA. But progress in agriculture alone is not sufficient. We need the other areas of the negotiations to also make progress. The network of linkages between different areas and issues is well known. We can certainly not afford to wait for results in agriculture before making further progress in NAMA, Services, Rules and all the other areas.

Fifth, we need to be ambitious but realistic in terms of our objectives for the Hong Kong Ministerial Conference. Setting our sights too low will inadvertently slow down the negotiations and put too much pressure on the Ministerial to make up for lost ground. At the same time, we should avoid generating expectations that cannot realistically be met. In my view, in order to have a good result at Hong Kong, we must seek to finalise 80 to 90 per cent of our work beforehand. This means that whatever objectives we set for Hong Kong we will need a work programme that can meet this expectation.

My final point, which follows on from the previous, is that in order to achieve a good result at Hong Kong, we must try to replicate if not improve on the work done in 2004. This means that we need to achieve some serious results before the August summer recess in Geneva. This gives us just under seven months. This is not much time.

Having set out the basis for our work in 2005, let me underscore what I see to be some of the key negotiating areas and issues where I believe we will need more focused attention.

With respect to agriculture, while far-reaching commitments were agreed on all three pillars of the negotiations – domestic support, export competition and market access – there remains a number of gaps to be filled and thorny issues to be resolved.

On export competition, despite the important commitment to eliminating export subsidies, we still need to fix an end date. With respect to domestic support, while it is accepted that countries with higher subsidy levels will reduce much more than those with minimal subsidies, the actual level of commitments to be assumed still needs to be carefully negotiated. On market access, while agreement was reached that reductions would be made through a tiered formula, we still need to negotiate the actual percentage reductions to be made by developed and developing countries. We also need to establish which products can be designated as "sensitive" and "special" and agree on disciplines to ensure that flexibility in this area is not used to circumvent market access commitments.

I am fully aware of the economic, social and political importance of agriculture in Africa and of the related sensitivities, not least with regard to the erosion of tariff preferences. Some of these concerns are being addressed in the negotiations and of course, any outcome of the DDA will be implemented over many years, thus providing substantial time for adjustment.

I believe, however, that African countries should take a longer view in positioning themselves in the negotiations. Many African countries have substantial medium-to long-term export potential for many agricultural products, including processed products. Overall, liberalization of agricultural trade heralds potentially big gains for African countries. Elimination of export subsidization and substantial reductions in trade-distorting domestic support will improve the competitiveness of African producers on the world market. It will also be particularly important in view of the ongoing Economic Partnership Agreement negotiations with the EU which are aimed at eventually leading to mutual free trade. At some point in the future this will fully expose African countries to competition from EU producers. Only a successful result in the DDA negotiations can level the playing field before that day comes.

I should also note that progress is being made on the cotton issue, particularly in respect of the development-related matters. As you know, the trade-related aspects are currently being addressed as part of the work on agriculture modalities. I am hopeful that we will find an acceptable way to give specific treatment to the cotton issue.

With respect to tariffs on industrial products (NAMA), the framework is only a half way point towards a final agreement on modalities. We need to make more progress here, particularly as some countries have indicated that agricultural reform will be conditional upon market opening for their industrial goods. Much work remains to be done and difficult decisions need to be taken. Significantly, efforts need to be focused on agreeing the type of formula to be used to make reductions. We should try to be creative. Assuming an agreement is reached on the type of formula, the issue of the percentage reductions to be made by developed and developing countries also has to be negotiated. Other challenges are the thorny issue of preference erosion and whether participation in sectoral arrangements should be voluntary or mandatory.

In terms of preference erosion, the July Decision already instructs Members to take into consideration in their further work the particular needs of non-reciprocal preference receiving countries. However, there are other developing countries who are seeking tariff reductions on those very products on which African Members are wishing to preserve preferences. We will need to reconcile these two conflicting objectives in the future modalities.

With respect to services , while progress has generally been made in the negotiations, the number of initial offers remain quite low. This is very worrying. Of the currently 47 services offers (counting the EC as one), only four have been submitted by African countries. Given the importance of services as an engine for trade and development, I would urge you to work towards increasing the number of offers on the table. I understand that for many African countries, services is a fairly new field. Since the launch of the DDA we have conducted numerous national or regional technical assistance activities to improve capacity in this area. The WTO Secretariat would be pleased to assist any Member that may wish to have such assistance to prepare an offer and to improve their expertise. It is a mistake to undervalue the role of services. Our calculations show that in most Nordic African Initiative partner countries, services account for nearly 50% of the value added to the GDP.

We need more offers and of higher quality before the target date of May 2005. The quality so far is probably not good enough to persuade the business community that there is something in the DDA for them. Without that support we will have difficulty in concluding the round.

On development issues , we must work hard to ensure that the Doha Development Agenda lives up to its name. As regards special and differential treatment, we still face the challenge of fulfilling the Doha mandate. We are, however, seeing a new approach in the discussions. I tend to subscribe to the view that it may be more productive if we identify and discuss the underlying issues that the proposals are seeking to address. I am convinced that we can make progress in this area if Members show realism and exercise flexibility. We need to keep in mind the July 2005 deadline. I fear that less than significant progress in this area might well impact negatively on other parts of the negotiations.

Lastly, let me commend you on the positive role that you have played in helping to launch the trade facilitation negotiations. I would urge you to maintain that attitude, and to actively take part in the process. I understand that for some countries trade facilitation may seem a challenging task. It is nevertheless essential, especially for you, since developing countries have proven to be most impeded by existing red tape. Experience shows that small and medium sized enterprises and traders from developing countries are particularly hit by inefficient and cumbersome trade procedures. This is why Africa stands to benefit greatly from advancing trade facilitation work.

Members are, of course, well aware of the problems and limitations faced by African countries as a result of their capacity constraints. This is why the July Decision has made the delivery of large-scale technical assistance and support for capacity building an up-front commitment.

This is a snapshot of where we are in Geneva in some but not all of the areas for negotiation. As you can see, the road ahead could still be a rough one. And let me be very frank here. The DDA is still behind schedule and every new delay weakens the credibility and the value of the DDA. We need to approach our work over the coming months with a sense of urgency and determination and I am sure that I can count on your support in this regard.

Let me finish by touching on a few issues that I know are of great concern.

First, on 1 January 2005 the Agreement on Textiles and Clothing (ATC) expired and more than 40 years of discriminatory quota restrictions were eliminated. The abolition of quotas brings considerable welfare and efficiency gains for the global economy. There is also potential for more South-South trade as this sector liberalizes. We should also not forget that the abolition of quotas in this sector was a very important objective for developing countries in the Uruguay Round.

I know that there is anxiety on the part of some countries about adjustment costs resulting from quota abolition. Adjustment challenges are complex and vary from country to country. There is a role for the World Bank and the IMF in facilitating a coordinated response in support of domestic reform efforts and associated adjustments. Both these institutions have existing programmes and strategies that could help. Other countries could also play a positive role through South-South cooperation. The WTO Secretariat, on its part, organized five regional workshops in 2004 to address the issue of post-ATC adjustment challenges and to prepare the membership for ATC expiry. All these contributions will count, but there will be no simple solutions.

Second, fighting the scourge of HIV/AIDS is undoubtedly one of the greatest challenges that the world faces and Africa is the region that has been hardest hit. Africa played a leading role in securing agreement on the Doha Declaration on TRIPS and Public Health and the August 2003 waiver Decision on the implementation of its paragraph 6. The Declaration and Decision have clarified and facilitated the use of the flexibility in the TRIPS Agreement as well as added new flexibility to make it possible for poor countries, with limited or no domestic manufacturing capacity in the pharmaceutical sector, to make effective use of compulsory licensing. The transition period for LDCs in this area has also been extended by a further 10 years, to 2016. I would encourage you to continue playing a leadership role in current work on replacing the waiver decision with a permanent solution in the form of an amendment to the TRIPS Agreement.

Of course, what can be done in the WTO is only a small part of what is required to address problems of access to medicines. Other vital elements include differential pricing by the research industry, and initiatives by the international community, both bilaterally and through the Global Fund, to increase funding available for the purchase of drugs, and to develop public health infrastructure. I also welcome the efforts, for example through public-private partnerships, to promote research and development into neglected diseases.

Finally, let me say that I attach great importance to building institutional and human capacity on multilateral trade issues. Africa receives the most WTO-related technical assistance activities, in comparison with any other region in the world. WTO cannot, however, handle the job of capacity building on its own. For instance, it is not within the mandate, resources or expertise of the WTO to build factories, roads, ports and other infrastructure so vital for trade. What we need to do and have been doing, in this regard, is to develop a coherent strategy with development agencies and bilateral donors to ensure that resources are allocated to tackling the supply-side constraints that are preventing African countries from fully utilising market access opportunities.

We have also made it a priority to advocate the mainstreaming of trade into overall poverty reduction strategies and programmes and we are working closely with the World Bank, the IMF and other agencies. In this context, the WTO is contributing, for example, through the Integrated Framework, Joint Integrated Technical Assistance Programme (JITAP) and the Standards Trade and Development Facility to develop a coherent strategy with development agencies and bilateral donors to ensure that sufficient resources are allocated to tackle supply-side constraints.

In conclusion and returning to my original theme, let us together regenerate the Doha Development Agenda. In so doing, we can send a message of hope for Africa and the world. African countries, today, comprise 41 out of the 148 Members of the WTO and are active players in the negotiations. Africa has a significant and growing stake in the negotiations and must remain engaged so as to highlight its interests and concerns. With your goodwill and that of Ministers around the world, this year should mark the beginning of the end of the round.