AN ANALYSIS OF THE OUTCOMES OF THE AN ANALYSIS OF THE OUTCOMES OF THE NAMA NEGOTIATIONS AND IMPACT ON NAMA NEGOTIATIONS AND IMPACT ON

POVERTY REDUCTION IN SADC: Looking POVERTY REDUCTION IN SADC: Looking Beyond HONG KONGBeyond HONG KONG

Prepared by Temwa R. Gondwe, Project Manger-TradePrepared by Temwa R. Gondwe, Project Manger-Tradetgondwe@mejn.mw tgondwe@mejn.mw

Malawi Economic Justice NetworkMalawi Economic Justice NetworkFor SARPN & EJNFor SARPN & EJN

At At Regional Strategy Meeting Hong Kong Trade Ministerial Regional Strategy Meeting Hong Kong Trade Ministerial Conference Outcomes: Implications for poverty reduction in SADCConference Outcomes: Implications for poverty reduction in SADC

6-7TH April, Gauteng.6-7TH April, Gauteng.

economic justice network of FOCCISAFellowship of Christian Councils in Southern Africa

Presentation OutlinePresentation Outline

Contextual CommentsContextual Comments Introductory remarksIntroductory remarksStructure of SADC EconomyStructure of SADC EconomyNAMA negotiations in Hong KongNAMA negotiations in Hong KongLooking beyond Hong KongLooking beyond Hong KongConclusionConclusion

Contextual CommentsContextual Comments

““Forcing poor countries to liberalise through trade Forcing poor countries to liberalise through trade agreements is the wrong approach to achieving growth agreements is the wrong approach to achieving growth and poverty reduction in Africa, and elsewhere.”and poverty reduction in Africa, and elsewhere.”

Commission for Africa report, March 2005Commission for Africa report, March 2005

““A monkey sets to scale up aA monkey sets to scale up agreased poll. Each day it climbs threegreased poll. Each day it climbs three

feet of the poll while it falls down two feet in the nextfeet of the poll while it falls down two feet in the nextday. How long will it take to climb up a sixty-foot high poll?”day. How long will it take to climb up a sixty-foot high poll?”

AnonymousAnonymous

Introductory remarksIntroductory remarks

When going to Hong Kong the objectives of the When going to Hong Kong the objectives of the negotiations were “to establish modalities for the negotiations were “to establish modalities for the reduction or, as appropriate, the elimination of reduction or, as appropriate, the elimination of tariffs, including the reduction or elimination of tariffs, including the reduction or elimination of tariff peaks, high tariffs and tariff escalation, on tariff peaks, high tariffs and tariff escalation, on non-agricultural products at the ministerial.”non-agricultural products at the ministerial.”

Coming out of Hong Kong: reduction of industrial Coming out of Hong Kong: reduction of industrial tariffs in both developed and developing tariffs in both developed and developing countries. countries.

Structure of SADC EconomyStructure of SADC Economy

Generally not changed for the past 30 Generally not changed for the past 30 years- Agriculture still dominant…over years- Agriculture still dominant…over 40% of GDP in most countries40% of GDP in most countries

Poorly developed and deteriorating Poorly developed and deteriorating infrastructure: roads, railways, ports, infrastructure: roads, railways, ports, telecommunications, etc.telecommunications, etc.

Manufacturing decreasing: low capacity Manufacturing decreasing: low capacity utilisation, limited trained personnel, poor utilisation, limited trained personnel, poor technology and plant design.technology and plant design.

SADC Structure…cont’dSADC Structure…cont’d

Structure of Production:Structure of Production:

Similar range of productsSimilar range of products - -foodstuffs, beverages, foodstuffs, beverages, tobacco, textiles, clothing and footwear, which are tobacco, textiles, clothing and footwear, which are agricultural-resource based. agricultural-resource based.

Manufactured goodsManufactured goods - substantial proportions to - substantial proportions to total formal merchandise exports in South Africa, total formal merchandise exports in South Africa, Mauritius and “Zimbabwe”…Mauritius and “Zimbabwe”…

NAMA Negotiations In Hong KongNAMA Negotiations In Hong Kong

A Quick Review:A Quick Review:

Based primarily on proposals of developed countriesBased primarily on proposals of developed countries Reduction of industrial tariffs in both developed and Reduction of industrial tariffs in both developed and

developing countries. developing countries. LDCs kept away from mathematical wizardy of tariff LDCs kept away from mathematical wizardy of tariff

rate cuts-text promised to provide duty-free and rate cuts-text promised to provide duty-free and quota-free market access based on Annex-F. quota-free market access based on Annex-F.

Concern for the LDCs of their product of export Concern for the LDCs of their product of export interest remained the same interest remained the same

Developing countries fiercely opposed the developed Developing countries fiercely opposed the developed countries-backed Swiss Formula countries-backed Swiss Formula

NAMA Negotiations In Hong KongNAMA Negotiations In Hong Kong

Review Cont’d:Review Cont’d: The negotiators left for Geneva to detail out the The negotiators left for Geneva to detail out the

coefficients coefficients Deadline for modalities on NAMA was set on April 30, Deadline for modalities on NAMA was set on April 30,

2006 2006 The text absolutely ignored the erosion of preferences. The text absolutely ignored the erosion of preferences. REMARK: It is unambiguous that high co-efficient

is needed to protect local industries, but given the current negotiation tactics employed by rich countries, it would be very difficult for many developing countries to negotiate in their interests.

NAMA Negotiations In Hong KongNAMA Negotiations In Hong Kong

Impacts on Poverty: Back to Square ONEImpacts on Poverty: Back to Square ONE NAMA talks heading towards a developmental NAMA talks heading towards a developmental

disaster: disaster: developed countries are having their way which is to force developed countries are having their way which is to force the developing countries to massively cut (or even altogether eliminate) the developing countries to massively cut (or even altogether eliminate) industrial tariffs on a line-by-line basis in an irreversible manner. This is industrial tariffs on a line-by-line basis in an irreversible manner. This is ruling out the future prospect of industrial development, and therefore ruling out the future prospect of industrial development, and therefore economic development, in today’s developing countries.economic development, in today’s developing countries.

Historical tried and tested methodologies and policy Historical tried and tested methodologies and policy actions should be incorporated: actions should be incorporated: contrary to what many contrary to what many developed countries would have us believe, there is a developed countries would have us believe, there is a respectable historical case for tariff protection for industries that respectable historical case for tariff protection for industries that are not yet profitable, especially in developing countries. By are not yet profitable, especially in developing countries. By contrast, free trade works well only in the fantasy theoretical contrast, free trade works well only in the fantasy theoretical world of perfect markets.world of perfect markets.

NAMA Negotiations In Hong KongNAMA Negotiations In Hong Kong

Impacts on Poverty Reduction…cont’dImpacts on Poverty Reduction…cont’d

The historical and contemporary evidence shows that it is extremely difficult, if not totally The historical and contemporary evidence shows that it is extremely difficult, if not totally impossible, for technologically backward countries to develop without trade protection (of impossible, for technologically backward countries to develop without trade protection (of which tariffs are the main element) and subsidies. The evidence shows trade liberalization which tariffs are the main element) and subsidies. The evidence shows trade liberalization works only when it happens gradually and selectively as part of a long-term industrial works only when it happens gradually and selectively as part of a long-term industrial policy.policy.

Premature liberalization in sub-Saharan Africa has been devastating:Premature liberalization in sub-Saharan Africa has been devastating:

Economic growth in the continent was negative in per capita terms, while Economic growth in the continent was negative in per capita terms, while manufacturing employment collapsed. Eg.manufacturing employment collapsed. Eg.

1.1. In Malawi, following trade liberalization starting in 1985, two-thirds of all In Malawi, following trade liberalization starting in 1985, two-thirds of all manufacturing jobs were lost. manufacturing jobs were lost.

2.2. In Uganda, domestic production was swamped by imports as manufacturing In Uganda, domestic production was swamped by imports as manufacturing capacity utilization fell to just 22 per cent and although growth has returned in capacity utilization fell to just 22 per cent and although growth has returned in the last few years, the rate is extremely low and its sustainability is questionable.the last few years, the rate is extremely low and its sustainability is questionable.

NAMA Negotiations In Hong KongNAMA Negotiations In Hong Kong

Impacts on Poverty Reduction…cont’dImpacts on Poverty Reduction…cont’d Principles that govern the NAMA negotiation (and the WTO as a Principles that govern the NAMA negotiation (and the WTO as a

whole) – notably the ‘level playing field’ - are profoundly flawed. whole) – notably the ‘level playing field’ - are profoundly flawed. Others, such as special and differential treatment, less-than-full Others, such as special and differential treatment, less-than-full reciprocity and flexibility, are interpreted in such a narrow way reciprocity and flexibility, are interpreted in such a narrow way and twisted, as to rob them of their developmental content and and twisted, as to rob them of their developmental content and undermine their practical value in the negotiations.undermine their practical value in the negotiations.

All in all, there are strong theoretical and empirical arguments All in all, there are strong theoretical and empirical arguments that show that the kind of tariff cuts proposed in the current that show that the kind of tariff cuts proposed in the current NAMA negotiations are likely to damage the future of the NAMA negotiations are likely to damage the future of the developing countries. It may not be too much of an exaggeration developing countries. It may not be too much of an exaggeration to say that the developing country trade negotiators have to fight to say that the developing country trade negotiators have to fight the developed countries’ NAMA proposals as if the future of their the developed countries’ NAMA proposals as if the future of their countries depended on it.countries depended on it.

Looking beyond Hong KongLooking beyond Hong Kong Immediate StepsImmediate Steps

An Assessment of Effectiveness of Market Access given in Hong An Assessment of Effectiveness of Market Access given in Hong KongKong – export trends, tariff peaks and export destination. – export trends, tariff peaks and export destination.

strengthen the political unity and technical cohesion in order to strengthen the political unity and technical cohesion in order to present a common view on the important issues. It may be present a common view on the important issues. It may be useful to have the meetings at the level of Ministers;useful to have the meetings at the level of Ministers;

Special efforts are needed to keep the group united and voice Special efforts are needed to keep the group united and voice the position of group in unison. the position of group in unison.

The capitals of the countries should widen the consultations on The capitals of the countries should widen the consultations on the WTO issues within their countries. the WTO issues within their countries.

Looking Beyond Hong KongLooking Beyond Hong Kong Need for Adequate and Continuous PreparationNeed for Adequate and Continuous Preparation

WTO meeting in Hong Kong beginning of new phase - WTO meeting in Hong Kong beginning of new phase - need to need to mobilise resources for technical preparation in order to protect mobilise resources for technical preparation in order to protect areas of interest and launch a concerted effort with coalition areas of interest and launch a concerted effort with coalition partners towards capturing the initiative from the very partners towards capturing the initiative from the very beginning of the new phase.beginning of the new phase.

Within the milieu of trade policymaking process, such Within the milieu of trade policymaking process, such preparations have to be embodied at least in five focal areas in preparations have to be embodied at least in five focal areas in acoordinated fashion: the Ministry of Commerce, Permanent acoordinated fashion: the Ministry of Commerce, Permanent Mission in Geneva, Chambers of Commerce and Industries, Mission in Geneva, Chambers of Commerce and Industries, the institutions involved in policy research and analysis, and the institutions involved in policy research and analysis, and the concerned civil society organisations.the concerned civil society organisations.

Looking beyond Hong KongLooking beyond Hong Kong Research Based AdvocacyResearch Based Advocacy

The purpose of policy-research is not to provide governments The purpose of policy-research is not to provide governments with ready-made negotiating briefs but to provide information with ready-made negotiating briefs but to provide information to officials about the trade-offs they face – the likely costs and to officials about the trade-offs they face – the likely costs and benefits of different options, technical solutions to practical benefits of different options, technical solutions to practical problems, insight into the various linkages that exist in an problems, insight into the various linkages that exist in an issue area, etc. issue area, etc.

Main objective of studies will be to analyse the impact of Main objective of studies will be to analyse the impact of various proposals so far submitted by the WTO members and various proposals so far submitted by the WTO members and to prepare inputs for developing strategy with a view to to prepare inputs for developing strategy with a view to pursuing the interests of SADC as well as least developed pursuing the interests of SADC as well as least developed countries in on-going WTO negotiations in the post Hong countries in on-going WTO negotiations in the post Hong Kong phase.Kong phase.

Looking beyond Hong KongLooking beyond Hong Kong

Some pro-defensive/Offensive strategiesSome pro-defensive/Offensive strategiesBuilding issue based-coalitionsBuilding issue based-coalitions ““Rolling the Log”Rolling the Log”Cross cutting AccommodationCross cutting AccommodationBridging solutionBridging solution

ConclusionConclusion As this war on ‘futures’ rages on, it will be imperative that the As this war on ‘futures’ rages on, it will be imperative that the

developing countries agree on their defensive and offensive developing countries agree on their defensive and offensive strategies. strategies. Faizel Ismail, the head of the South African Delegation to Faizel Ismail, the head of the South African Delegation to the World Trade Orgnization, Permanent Mission of South Africa to the World Trade Orgnization, Permanent Mission of South Africa to Geneva, asks the following questions : Geneva, asks the following questions : What do you consider to What do you consider to be the main obstacles to the successful conclusion of the Doha be the main obstacles to the successful conclusion of the Doha Round? How would you suggest these obstacles could be Round? How would you suggest these obstacles could be overcome and result in a successful conclusion of the Doha overcome and result in a successful conclusion of the Doha Round by the end of 2006? What role can South Africa and Round by the end of 2006? What role can South Africa and Africa play in this?Africa play in this?

Role for Civil Society to give alternatives…NOWRole for Civil Society to give alternatives…NOW