Re-Claiming Development in the Doha Round - Speech by EU Commissioner Mandelson

Sommaire: Re-Claiming Development in the Doha Round - Speech by EU Commissioner Mandelson (9 February 2006: Mauritius)

Speech by Peter Mandelson, EU Trade Commissioner, Chamber of Commerce and Industry, Mauritius

Re-Claiming Development in the Doha Round

Tonight I want to make an appeal. An appeal that in 2006 we make the long awaited breakthrough in putting trade at the service of development. And an appeal to the true mass membership of the World Trade Organisation - the G90 developing countries - to join with the European Union and others in working together for a win-win outcome to the Doha Trade Round.

And what better place to make this appeal than Mauritius. Your share in world trade may be small, but your influence in the negotiations in this Doha round is strong. And it is an influence that rests on two solid foundations.

First, the traditions of democracy and multi racial tolerance that has made your country such a beacon in the developing world.

Second, your willingness to embrace this world of change even when it hurts. I fully understand the impact of the EU sugar reform on your economy. But that reform was inevitable, as you know. Europe could not maintain such a regime. The European Commission is fully committed to help ease the necessary restructuring. I give you a personal undertaking - because I can do no more - to fight as hard as I can to ensure we live up properly to that commitment.

Mauritius of course has the additional disadvantage of being "sea locked". But you have so far built a remarkable success out of this geographical challenge by opening your economy to outside influences and opportunities, which is indispensable to development.

Asia is showing how countries that embrace openness can trade their way out of poverty. Africa is still a long way behind. Yet a 1% increase in Africa's share of world trade would deliver more development every year than the continent currently receives all together in aid. Now Africa needs more aid to build its infrastructure and capabilities. But with aid and trade together, we can turn a hand out into a hand up.

I want a development Round that will boost not just bigger, more competitive, developing countries - acknowledging that the biggest contain many hundreds of millions of very poor people - but the small ones, the G90 countries like Mauritius.

Trade is good for development - but it is not a simple cause and effect. Trade opening has different effects on different countries. Brazil is not Burkino Faso. Mauritius is not China. Nor is it Madagascar.

The different interests of developing countries have to be recognised in the DDA. Hong Kong brought out these divergences. Between the LDCs and those others who want LDC privileges (as if being an LDC is a privilege!). Between the rapidly emerging economies without tariff preferences and the G-90 with them; between those who want aggressive liberalisation - in agriculture, at least - and those, like Mauritius and similar developing countries, who need a greater comfort zone to adjust gradually to global trade, increased competition and reduced preferences. Indeed, between countries who seek development in order to maximise wealth for a few and those who want to spread the benefits of trade across their people.

Recognising these differences is not an attempt to "divide and rule". On the contrary it's about recognition of special needs. This is what the "special and differential treatment" set out in the Geneva Framework Agreement in 2004 is all about. The European Union will fight to ensure that this concept of "special and differential treatment" is fully upheld as we reach the negotiating crunch on Doha this year.

Doha development challenges

What does this mean for Mauritius and the G90? What kind of deal in 2006 will help you maximise your exports and your growth, and help you trim your sails to the new trade winds?

Of course, whatever their size and status, all developing countries require special and differential treatment in their growth strategies. But there are at least half a dozen big issues in this Round that will help the G90, in particular, on the path to prosperity.

First, more market access to the big economies of the South. This is the key to your growth. South-South trade is already 40% of developing countries' exports. But barriers are still high. 70% of duties paid today by developing countries are paid to other developing countries, chiefly on industrial not agricultural goods because industrial goods are where the bulk of their trade takes place.

Small countries like Mauritius and most of sub Saharan Africa can profit handsomely from selling more to big countries like Brazil, India or South Africa. That is why we need to encourage the G20 countries to open their markets more. In Europe, which is already the receiving market of 75% of LDC agricultural products, we are ready to open our market even more. And we are putting pressure on the US, and others in the developed world, to do the same. But we are also putting friendly but firm pressure on big developing countries to open their markets to agriculture, industrial goods and services. Help us to do that, in a reasonable and proportionate way.

The EU pledged in Hong Kong that it will set no tariff above 15% in the entire industrial sector after a successful Doha Round, and possibly even no duty above 10%. That brings big potential gains for all developing countries in non-agricultural market access (NAMA).

But is this a deal that is only available to developing countries if they concede "forced liberalisation" of their own markets and loss of "policy space"? No, it is not. Let me underline that for the EU's part, LDCs and other small countries will not have to make commitments. Countries, in the G90 and G20, should contribute to the Round according to their level of development, according to their capacities. This is simple common sense. It is part and parcel of what I mean by special and differential treatment.

The second issue is that the services negotiations need a balanced push. Progress at Hong Kong was slight. I was disappointed, and frankly a bit puzzled, that many G90 countries opposed market opening in services even though they were not being required to open their own markets. As with goods, G90 countries contribute to market opening only when they feel ready to do so.

I am nonetheless convinced that it is in some G90 countries' interest to tap into the developmental benefits of services trade and I am glad that Mauritius has participated actively in these negotiations. Encouraging inward investment in sectors like transport, telecommunications and financial services - the hard wiring of any economy - is the foundation for sustainable growth. Developing countries need a strong service base to their economy and this should be reflected in the submission of revised offers.

Thirdly, there is Trade Facilitation. This has possibly the biggest potential for developing countries in the Round, but it is the least talked about. Reducing customs and transit barriers, removing the unproductive, deadweight costs that shippers have to pay, and getting goods faster from factory gate to the consumer makes all the difference to trade performance. An agreement on trade facilitation will improve customs efficiency, increase your collection of customs revenues - by 20% in typical cases - and decrease massively the costs to businesses from delays in cross border trade.

I welcome the fact that Mauritius is a strong believer in trade facilitation. It is excellent that the African business community has joined our industry federation UNICE in supporting an ambitious set of rules. The horrendous costs of getting goods out of Africa to overseas markets must be cut. So my message to the G90 is simple: don't allow trade facilitation to become the Cinderella of the DDA. The three ugly sisters - agriculture, NAMA, and services - should let it go to the ball.

Fourth, Aid for Trade. This item on the Doha agenda should directly benefit the G90. Everybody now recognises that open markets are only half the story for Africa: the continent urgently needs assistance in building infrastructure so as to exploit the market access offered by others. The opportunity to trade must be linked to the capacity to trade. That means building the infrastructure and the capacity for development.

That is why the EU pushed in Hong Kong for a substantial package, including a promise by Europe and its Member States to provide 2 billion euros/year of trade related aid. As a result Europe will provide over 50% of Trade Related Assistance worldwide. And this is without counting in aid for infrastructure, where the Commission's new initiative should really make a difference. You need to keep us to that pledge.

Aid for trade, capacity building and progressive market opening, are at the heart of the regional Economic Partnership Agreements that the EU is negotiating with its ACP partners. These agreements provide the framework for a substantial post Doha agenda of trade and development. They represent an ambitious opportunity for ACP countries and I am wholeheartedly committed to their success.

Fifth - and in the context of finding new development routes out of poverty - we need recognition of the problem of preference erosion. Market access does not automatically lead to development. There will be winners and losers. Winners will be the more competitive, the most open to investment, those that have planned furthest ahead and those who are the most efficiently governed. Preferential trade opening in itself by industrialised countries is not delivering the economic solution for poor developing countries. European agricultural reform is also going to have the same mixed effect - witness your concerns surrounding reform of our sugar regime.

Similarly, some beneficiaries of tariff preferences in developing countries are worried about preference erosion due to tariff reductions in the WTO. This is an inevitable process because of the very nature of liberalization. However, I understand these concerns and will insist that agricultural liberalization, where the pressure is strongest, takes place in a balanced way, benefiting all and not just a minority of competitive exporters. Unlike subsidies whose reduction is a priority, tariff reductions should not go faster than the market can bear.

Part of the solution is to strengthen the supply-side capacities of preference beneficiaries through "aid for trade". Another part is for all developed WTO Members as well as emerging economies to offer more generous preferences. At Hong Kong, Europe put all its weight behind the LDCs demand for duty and quota free treatment. We won, if not a total success, at least a good outcome, with pledges by other developed countries to move towards the EU's Everything But Arms policy. That was done thanks to Europe's close cooperation with Zambia and other key LDC players.

A final word on agriculture

Finally, let me say a word on the overall negotiating process. The DDA is different from previous trade rounds in that it is no longer industrialised members that are calling the shots. The WTO is far more egalitarian than the UN. It has no Security Council. Several African countries participated in the Green Room. It works on the principle of one country, one vote. So developing country coalitions have real clout, and I welcome this.

But let's not be mistaken: poor developing countries need to go where their real interests are. I come back to my point that differentiation between developing countries is a moral imperative that will help development, not impede it. So let us do away with the politically correct fallacy that developing countries are all alike and have the same interests. The G20 and the G90 do not have identical interests and capacities in trade. The EU is fully committed to supporting your interests in those negotiations, just as we want all developing countries to fulfil their potential. But that also requires on your part a willingness to assert your own demands, rather than be swept along by others with different economic interests.

So far the Doha negotiations have been driven by the demands of competitive agricultural exporters for further agricultural tariff cutting by the EU. In eliminating its export subsidies and trade-distorting domestic support, reducing its highest tariffs the most and ending tariff escalation, the EU is already offering to bind into the WTO substantial changes in agriculture, so that all developing countries can exercise their comparative advantages from farm liberalisation, both in subsidies and tariffs. But, let's be clear, the World Bank's own research suggests that most benefits from agricultural liberalisation will go to the developed world which can exploit it - the US, Canada, Australia and New Zealand notably - not to poor developing countries. And within the developing world, new market access would be snapped up by a few highly competitive agricultural exporters, not by the G90.

The costs of eroding existing preferential trade arrangements for the poorest developing countries, as tariffs come down, do not even figure in the Bank's analysis. Yet, if US tariff reduction demands were accepted, this would wipe out between half and two thirds of the preferential agricultural trade between Europe and the poorest developing countries. I will not agree to this course.

So, let's put agricultural liberalisation in its true perspective. For some it is significant. But it is by no means nirvana for all. For many developing countries it represents a real threat to their economic and social stability. It is only for a few that agricultural trade offers a model for their long-term economic development.

Conclusion

To ACP and G90 countries, failure in Doha would mean missed opportunities for new trade, and missed opportunities to attract new investment and new growth. That's why the EU is committed to maintaining and further developing a real partnership with ACP and G90 countries in the DDA. Obviously we have some differences. But there is far more that unites us than divides us, and I have tried hard to reflect your sensitivities and defensive interests in the positions I have taken, not always with recognition or understanding. However, I am confident that together we can deliver a Doha Round that genuinely delivers for trade and for development. That is my goal.

Ref: SP06-213EN
Source UE: Commission Européenne
UN forum:
Date: 9/2/2006

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