Africa+in+danger+of+Doha+runaround,+Makgetla,+Business+Day

Business Day, Johannesburg, 30 June 2006
=Africa is in danger of getting the Doha runaround=


 * Neva Makgetla**

NEGOTIATIONS currently under way at the World Trade Organisation (WTO) in Geneva represent a great risk for development in Africa.

Above all, they could rule out an industrial strategy aimed at creating employment and diversifying the economy. As a result, recent studies conclude that the current Doha round may actually harm African economies.

The underlying problem is that, despite the promise that this would be a “developmental round” at the WTO, the rich countries are taking a hard line. They have made only minimal concessions to expand their agricultural imports, while pushing for sharp tariff cuts and more open markets for services in the developing countries.

The US and European Union (EU) are placing extraordinary pressure on middle-income countries such as SA. They want SA to slash tariffs as a precondition for a fair trade dispensation in agriculture. In effect, this would make some poor countries sacrifice in order to get benefits for the very poor. Yet in dollar terms, the gross domestic product per person in the EU and US is more than 10 times higher than in SA.

A major obstacle to agricultural exports by developing countries has been steep tariffs and generous subsidies for farming in the richer countries. A central premise of the “developmental round” at the WTO was that these practices would be eliminated. But the concessions made by the US and the EU remain very modest. They look like high cuts on paper, but in practice will have little impact.

An even bigger problem is that tariffs and subsidies are not the main blockage to agricultural exports from Africa. A study by the Carnegie Endowment points out that an even bigger obstacle arises from the lack of infrastructure and marketing systems combined with high nontariff barriers in the rich countries.

In terms of other goods, under the acronym NAMA (nonagricultural market access), negotiations now focus on a set of cuts dictated by a formula. This approach specifically aims to prevent countries from adopting an industrial policy that tailors support to sectoral needs. In the event, all the industrialised countries had much higher tariffs in the early phases of industrialisation than the WTO formula would permit. The US and Europe in the 19th century, and east Asia until very recently, set tariffs at over 100% to encourage new industries.

The formula approach at the WTO is aggravated by the rich countries’ insistence on low coefficients, which lead to much deeper tariff cuts. The US recently demanded that the coefficient be only five points higher for developing than for industrialised countries. The result would be higher percentage tariff cuts in the south, since the north now has lower tariffs because its industries are well established.

The hard line from the north seems politically motivated. Governments want to say they won some gains in return for reducing support to agriculture. But the effect is that the rich economies demand a reward for giving up longstanding unfair trade practices. Meanwhile, poorer countries would face massive job losses and devastated industrial capacity.

The rich countries are also making steep demands that the middle- income countries open their markets for services. They have called on the developing world to open a host of sectors, from retail trade to energy to telecommunications and finance.

But trade in services is very different from trade in goods. It effectively means countries agree to end barriers to foreign investment in services and permit the immigration of service providers. The risk is that the required “national treatment” of foreign investors may limit the ability to take forward important national policies.

For instance, broad-based black economic empowerment provides benefits only for South African citizens. Arguably, that could contradict WTO requirements. The Mexican government was told it could not subsidise the national telecommunications provider to meet the needs of the poor, because it undermined competition by foreign companies. The South African government is certainly aware of the risks of the current negotiations, especially around NAMA and services. Still, SA remains under extraordinary pressure to agree to a deal that would make industrial policy far more difficult.

In these circumstances, the rest of society should do more to support the demand for a genuine developmental approach in the WTO negotiations.


 * Makgetla is a Congress of South African Trade Unions economist.


 * From: http://www.businessday.co.za/articles/opinion.aspx?ID=BD4A224511**

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