GLOBAL TRADE:A Search for Agreeable Landing Zones

As the global economic and political heavyweight, the United States (US), has a huge influence over multilateral platforms. Be it the World Bank, the International Monetary Fund (IMF), the World Trade Organisation (WTO) or the club of eight rich countries (G-8), the US remains the most significant player. Of course, it is also credited for pushing for the creation and evolution of most of these multilateral platforms.

No different is the case with the WTO. Even if critics continue to condemn US reluctance to end agricultural subsidies, which eventually erodes the trade competitiveness of agricultural-based economies (most of them Least Developed Countries (LDCs)), the US continues to be one of the advocates of the benefits of multilateral trade negotiation. This same stance was reflected in the latest WTO ministerial meeting, held in Bali, Indonesia. The meeting, in which trade facilitation stands high on the agenda, saw US negotiators lending their weight to a successful agreement.

It was with the aim of clarifying the stance of the US over issues related to the WTO and its latest round of negotiations that Michael Froman, trade representative of the US, and Michael Punke, permanent representative of the US to the WTO, spoke to journalists in the sides of the Bali meeting. In the briefing, wherein TAMRAT G.GIORGIS, MANAGING EDITOR, took part, the officials dealt with issues ranging from the future of the WTO to the accession of Ethiopia. Excerpts:

Q: Ethiopia is in the accession process and very soon will submit offers on services. To what extent will your government be engaged in Ethiopia and what will your expectations be in that services offer?

Froman: Well, let me talk generally about Ethiopia’s accession process. We are very supportive of Ethiopia’s accession. We know it has been a long time in process.

We are very much committed to devoting the resources, ourselves in Washington, as well as in Geneva, to work through the issues with Ethiopia, as we do with other accession candidates, particularly least developed countries (LDC), to try to make the process as smooth as possible.

I spoke about the accession process with your Prime Minister and trade minister when I was in Addis Abeba over the summer. It is a process we are following very closely and we are hopeful that we can make significant progress on it.

Punke:  The only thing I want to add to that is one very important deliverable that came out of the last ministerial meeting in Geneva was a commitment by the World Trade Organisation (WTO) members to really look at the LDCs accession process and come up with new guidelines. And that is something we were able to do successfully and put in place last summer. These new guidelines, I think, give us an additional measure of making sure that we are appropriately sensitive to the situation of LDCs who are attempting to accede to the WTO.

Q: Is the US as hopeful to leave Bali with an agreement? What are US concerns regarding the LDCs? Are they sharing the same concerns as LDCs with regards to the current negotiations?

Froman: I am hopeful that we can reach an agreement here, I think there is a package that is very much within reach. There has been a lot of very good work done in Geneva over the last several months.

Hard-fought compromises, difficult negotiations. At the end of the day, there was a package that included trade facilitation, development in LDC issues and agriculture that the membership was able to embrace. And we heard yesterday one delegation after another – from developed to developing countries, from the LDC group, the Africa group, the ACP group, as well as others – all standing up to say that there is a package on the table that is worth harvesting.

They want to see Bali be successful in harvesting that agreement. We are hopeful that we can work through whatever remaining issues individual countries have in order to achieve that objective.

And if I understand the second question correctly, I think the LDCs and ourselves, as well the ACP and the Africa group, share the same set of aspirations for Bali and concerns about what happens if Bali fails. One way or the other, this is going to be a very significant week for the WTO and the multilateral system.

And if we are successful here in harvesting a package, it gives further momentum to the multilateral trading system to take on additional issues and further deepen trade liberalisation. This is very much in the interest of all countries, all members, but particularly LDCs and others, because some of us are pursuing bilateral agreements or regional agreements, but the importance of the WTO is that it is available to all members.

Therefore, it is of particular value to those who are not involved one way or another in these other negotiations. If successful, it can give great momentum for further progress on a multilateral level. If we are not successful, it is hard to see how to make further progress on Doha or other issues.

These issues, like trade facilitation, are clearly win-win issues for everybody.  Trade facilitation has been estimated to reduce the cost of trade for developed countries by 10pc, but for developing countries by 14pc. This is an important development objective too, and if we cannot harvest these win-win elements of a package here, it is hard to imagine how we take on the more difficult issues of agriculture, services and manufactured goods, in Geneva.

Q: When will the US give full duty-free access to all LDCs?

Punke: The US is supporting a duty-free, quota-free deliverable in Bali, in which we have made a very strong political statement “for seeking to improve duty-free quota-free access to LDCs”. That is something we have supported.

But I would like to note that our duty-free quota-free access level for the Agricultural Growth & Opportunity Act (AGOA) members (AGOA LDCs) is 97.6pc, that is for AGOA members of the WTO. But further, one very interesting thing in duty-free quota-free issues is that it was a very complex debate in Geneva among developing countries and LDCs.

What we heard were several LDCs expressing concerns about duty-free quota-free access, because of concerns about preference erosion. We also heard a lot of concerns expressed by developing countries that are in a similar situation to LDCs about duty-free quota-free access for the same reason of preference erosion. It was a very complex debate in Geneva and I think that the best balance that could be struck is what is in the statement that the US has supported of making this commitment to seek to improve access.

Q: In the Bali package, there are three topics of concern, especially the reform on agriculture and the elimination of export subsidies, and technical assistance for LDCs on trade facilitation. I was wondering about the US position today on the two issues. Since the first day of this ministerial conference, everybody has been saying they want an agreement. Are these only political statements? I am wondering who is going to make this agreement fail.

Froman: Let me take the second question and maybe Ambassador Punke will take the first one. I think, yesterday, the heads of the delegation, in the afternoon, gave a mandate to the director general, Roberto Azevedo, to intensify his consultations with the aim of finding landing zones on the remaining issues, in order to determine, hopefully, where an agreement could be possible. I think he has began that process, and I think we and the other countries in the room were supportive of that process.

We are actually seeing the director general this morning to participate in that process. We will play our appropriate role there and hopefully through that process, we will be able to identify, or he will be able to identify, an appropriate landing zone so that Bali will be a success. And that is our goal for today.

Punke: And, if it is helpful maybe, I will pick up on the specific aspects of the questions that you asked. The US position on agriculture and export competition, specifically.

We were part of the negotiation in Geneva on export competition and we very much support the political declaration that was agreed in Geneva, which indicates the ongoing importance that all of the WTO members place on keeping that issue central.

You also asked about trade facilitation. The last week in Geneva before we came here, was basically a week-long exercise of the US working very intensively with the Africa group, the ACP group and the LDC group to reach an agreement on the appropriate flexibilities for developing countries and LDCs. And we were very happy to culminate that successfully, and so that is the momentum that we brought to Bali.

Q: The WTO talks about lifting trade barriers, basically to facilitate trade. Now, one of the fears for LDCs is supply-side constraints. Without trade barriers the LDCs might end up importing more and exporting less, which would affect their current competitiveness. Are there any mechanisms in the WTO that would help boost LDC’s potential to export? If the objective is to reduce poverty, during the opening ceremony several remarks were made that out of the many objectives of the international trading system, one was to reduce poverty.

Froman:  Let me take the second question. I think there are very legitimate issues around food security. Certainly, we share that concern, and the US has been at the forefront of bringing food security and poverty alleviation and dealing with hunger, as the front runner of the development agenda over the last five years.

We launched a major food security initiative in 2009, with the G-8 and others that mobilised more than 22 billion dollars for food security. And then, we chaired the G-8 in 2011. We launched another effort in 2012 by the New Alliance on Food Security, which has mobilised billions of dollars worth of public funding, but also private sector investment, in countries, in LDCs around the world, and other countries in need of food security, to promote agricultural development.

We take food security very seriously. And that is why we are particularly focused on ensuring that if countries decide to take action to deal with their food security issues, they do so in a way that does not cause food insecurity for poor farmers in other countries.

That has really been the focus of the discussion here; to ensure that there is no spillover in a way that would distort trade and have a negative impact on farmers in other countries. If you stockpile grains and other products and then those products end up getting dumped on the international market, it depresses prices and hurts farmers in other poor countries, and they are not able to prosper and grow their products. This, in turn, creates potentially more poverty and more hunger in other countries.

I think your question is a very good one, because the disciplines of the WTO are about ensuring that if countries are going to engage in subsidy programs and food security programs, they do so in a way that does not have an adverse impact on other countries. That is very much what our focus is here today. We want to make sure that those do not have adverse effects on LDCs or others who are in the international trading system.

Punke: I am not sure I fully understood your first question – as I heard it, it was addressing a concern that if a country opens up more to trade, there is this potential of imports coming in and being disruptive. And I think what we have seen, especially in the last 10 years, is a fundamental change in the way that trade happens around the world, and the development of these global supply chains.

The developing countries that we have seen being most successful economically are those that are able to be part of those global supply chains. A lot of the goods that are imported in the countries end up being components that go into goods that are then exported out of countries and so the ability to import is part of the ability to export. And when we look around at the countries that are succeeding the most, we see that those that are most a part of those supply chains are  being the most successful. I think that is a lot of what the WTO is about.

Froman: Can I just add to that? Yesterday we celebrated Yemen’s accession to the WTO as the 160th member. And speaking with the Minister of Trade from Yemen, the country – like so many other countries that have recently joined the WTO, or like those who are in the process of going through the accession process – is using accession as a way of ensuring that they engage in the economic reforms necessary to drive development and growth in their economies. The WTO accession process itself can be a mechanism for defining an economic reform agenda to ensure the competitiveness of a country and its role in the international trading system.

Q: Early in the week we had a lot of protesters outside of this facility saying that the WTO and everything else has failed and the stuff that has worked is all from America. What do you say about that?

Froman: Just to build on what Ambassador Punke said, I think there is no question that the WTO, by establishing international rules and disciplines for countries, has helped to expand trade, promote growth and promote development – with the WTO and the GATT before it – since the Second World War. The tremendous growth in international trade and international investment, I think, is due in no small measure to the fact that there is a system of rules and a dispute settlement mechanism, as well as a mechanism for bringing down barriers through successive negotiations.

That is going to bring tremendous benefit to the economies as a whole. And even during this most recent financial crisis of 2008/09, the fact that there was WTO disciplines in place, allowed the international community to get through the crisis without resorting to the kind of protectionist measures that created the Great Depression in the 1930s.

While no country is perfect and there were actions taken, the WTO itself has assessed that those actions affected less than one percent of global trade. And that is really a tribute to the rules-based trading system that the WTO represents, in terms of creating that kind of discipline. So I think it has had a tremendously positive impact on global growth, on trade, on globalisation and, very importantly, on lifting hundreds of millions, if not billions, of people out of poverty over the last several decades. As barriers have come down, trade and standards of living has increased.

Q: One of the fears among Ethiopian policymakers is when they submit the offer on services, they seem to think they are not ready to open up some sectors of the economy, specifically finance and telecom, and the US is one of the forces pushing for the opening of these sectors.  To what extent will the US government be patient in providing relief for Ethiopia after they join the WTO? Will they be able to remain closing those service sectors? And incidentally, when do you expect Ethiopia to submit the service offers?

Punke: Well I would not get into all the specifics of timing, but I will say that we do believe that part of the accession process that is enormously beneficial to acceding countries is this focus, which Ambassador Froman talked about, on domestic reform. And from that standpoint, we think that some of the most critical infrastructure for successful integration into the international economy includes areas like state of the art financial services and state of the art telecom. That is something that we discuss with countries that are considering acceding to the WTO, because we think it is so vital that that part of the economy be operating at a very high level.

Q: China has proposed to support countries with the production of cotton and processing of cotton. What does the US intend to do in terms of supporting. 

Punke: First of all, we were very happy to see China’s announcement. We have also been working with the C-4 countries for many years in the area of technical assistance. One focal area for us has been on a program through our Department of Agriculture that provides technical assistance to C-4 cotton farmers. We are also very happy to be able to support the Ministerial Declaration on Cotton that will be part of the Bali package, if we can be successful. It focuses on a lot of those aspects of technical assistance and support for C4 cotton farmers.

Q: How can LDCs get maximum benefit from the WTO, because some progress is likely to be slow? What is the change in the future for the LDCs?

Punke: Our intent is to work with all countries that become members of the WTO to be able to take maximum advantage of their participation in the institution. And I think that covers a broad range of opportunities, including full participation in all the WTO committee work.

One of the things that people do not focus on when talking about the WTO is the day to day work – whether it is the committee on agriculture, committee on trade and development or committee on technically barriers to trade. There are ongoing opportunities every day for countries to better integrate in the global economy through participation in this ongoing work.

Q: A specific challenge for most Pacific countries is in terms of shipping. How can the WTO, from America’s perspective, help countries in the Pacific take advantage of opportunities that come from being part of the WTO?

Froman: Ambassador Punke’s previous answer is a good start. There are so many areas of WTO activity that are relevant to all the members if they can participate. Since you mentioned shipping in particular, let me just underscore that what we are here in Bali in part to talk about is trade facilitation.

That is all about the impact of barriers at the border, frictions at the border, processes, customs harmonisation, cooperation among customs officials and so on, for shipping and other processes for transporting goods; so that we can eliminate those costs in the system, make it more efficient; and so that we can make countries more competitive and allow them to participate more actively in the global trading system.

I think that is one reason why trade facilitation has become a focus for developed and developing countries – because all countries benefit. So I think the pacific countries will also benefit terrifically from a trade facilitation agreement and I think that is true of a number of other developing countries as well.


Published on December 8, 2013 [ Vol 14 ,No 710]



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