Unhitching the one size fits all syndrome

Excerpts of a speech delivered by Trade and Industry Minister Ken Valley at the  Commonwealth Parliamentary Association/World Trade Organisation (WTO) Regional Workshop for Parliamentar-ians held on July 28-30, 2003 Trinidad and Tobago.

I am especially pleased that a workshop of this nature is taking place for parliamentarians of the Caribbean region. I would like to take this opportunity to extend a warm welcome to the members of the WTO and CPA, as well as to all regional parliamentarians who have journeyed to Trinidad to attend this workshop. As the Minister of Trade and Industry of the host country, I am extremely pleased to have been invited to deliver the feature address. Trade liberalisation and globalisation have today become buzz words. Some of us long for what we consider the good old days of import restrictions, high tariffs and negative lists. The reality is that those days are gone. Today, we in the Caribbean are engaged in trade negotiations in different fora. We have recently concluded the CARICOM/Costa Rica trade agreement and the bilateral level. The CARICOM Single Market and Economy continues to engage our attention at the regional level while at the hemispheric level there is the Free Trade Area of the Americas (FTAA). Overarching all of this at the multilateral level is the World Trade Organisation (WTO) which is the subject of our workshop over the next three days.

Underpinning this trend towards trade liberalisation is the current day thinking that liberalisation and globalisation lead to economic growth. Having said that, however, let me hasten to put on the record the viewpoint of some that the casual relationship is reversed. Some argue that trade liberalisation and global integration are outcomes of economic growth rather than being prerequisites for it. However, the fact is that there is a distinct international trend towards the institution of programmes of economic reform, which seek to integrate national economies into the global economy. As small economies we do not make the rules. We can, however, influence them. We must understand the attendant implications for developing economies in general accruing from the rules, so that we can influence them for our benefit. Trade liberalisation usually represents one component of the economic reform process. Other elements include far-reaching measures such as macro-economic stabilisation, internal liberalisation and extensive privatisation. It should be noted also, that trade liberalisation does not only establish powerful direct linkages between the domestic economy and the world but also increases international competition. Accordingly, the magnitude of growth of market-based trade, financial flows and the harmonisation of trading policies observed within recent times, is to a large extent indicative of the paradigm shift towards the creation of an integrated global economic system. Undoubtedly, this global process and the multilateral trading system have placed numerous challenges squarely at the door steps of the states and organisations that we represent.

WTO : Keeping trade rules

Within all of this, the WTO has emerged as the only international organisation responsible for the administration of multilateral trade rules, whose strength lies in the breadth and scope of the areas under its purview and the efficacy of its enforcement mechanism. In turn, its agreements provide the rules that guide governments in the formulation of policies and practices in the area of international trade. This has become increasingly relevant to democratic parliamentarians, as the pace of the globalisation process has quickened. As a fact, within recent times, developing economies have become increasingly vulnerable to external shocks. Growth in the global economy has slowed in the face of the contagion effects of the September 11 terrorists attack and the downside risks of the geopolitical uncertainties of the Middle-east crisis. Closer to home, these shocks have been most pronounced in `consumer discretionary sectors’ such as the airline and related industries. The contraction of the Regional tourism industry has undoubtedly been an area of concern which has been highlighted since it has been estimated that the Caribbean tourism industry accounts for approximately US$18 billion in annual revenues and provides direct employment for about one million persons. Further, it is estimated that 70 percent of the 20 million arrivals are derived from the US and European markets.

Following the contraction in global aggregate GDP experienced in 2002, the world economy has demonstrated signs of recovery in 2003, with economic expansion for the Latin American region forecasted to be in the region of 1.5 percent for this year and 4 percent in 2004. More importantly, the performance of the Trinidad and Tobago economy within such a sluggish environment, and which has been underpinned by nine consecutive years of growth, has underscored the importance of astute fiscal and economic governance, within a sustainable macro-economic framework. This suggests that under the correct circumstances, small developing economies can indeed derive meaningful gains from the multilateral trading system. Concomitantly, the effects of liberalisation and the accompanying trend towards the erosion of traditional preference margins enjoyed by many regional economies have collectively served to exacerbate balance of payment problems, effectively threatening the survival and socio-economic development of such territories. Not surprisingly, in the presence of the poor performance of the global economy and inequitable distribution of the benefits from trade liberalisation in favour of developed countries, many developing economies seem reluctant to engage in further multilateral liberalisation initiatives such as Regional trading and bilateral free trade agreements (FTAs).

‘You liberalise while we subsidise’

Further, many developing countries have instituted the full spectrum of liberalisation initiatives, both autonomously and under the instructions of the World Bank and the IMF, and continue to acquiesce to pressures to provide additional market access. At the same instance, many developed members continue to provide extensive subsidies to their domestic producers and exporters, effectively distorting global production and trade. This `you liberalise while we subsidise’ phenomenon has also served to weaken confidence in the international trading system. There must be, however, an appreciation of the need to ensure that the fallout of the multilateral trading system and any uncertainty with respect to the future performance of the global economy do not fuel alarmism. Such a situation could prompt countries to embark on a course of `neo-protectionism’ which may entail the use of policy instruments which are in contravention to the spirit and intent of existing global and Regional trade agreements, serving to fragment already small regional markets further and frustrate the hemispheric and international integration processes presently being undertaken.

There also exists some measure of concern amongst some developing countries and many trade luminaries with respect to the proliferation of bilateral free trade agreements (FTAs). This concern is largely confined to bilateral FTAs which essentially undermine the multilateral trading system and force developing countries to provide increased market access to the products of developed countries, while at the same time further eroding already slim margins of preference enjoyed by other developing countries in developed country markets. This domino effeect of FTAs induced by the major global players has the potential of producing a `spaghetti bowl’ of agreements and a conundrum of rules. While such FTAs have been advanced as a means of deepening the integration process, the end result has invariably been the considerable weakening of the leverage of developing countries in multilateral trade negotiations; the introduction of extraneous issues into the global trading system; and clouding of the role of the WTO. Furthermore, in many instances these FTAs reduce the policy space available for developing countries to safeguard their development and strategic domestic industries. If un-regulated these bilateral FTAs pose a serious threat to the integrity of the multilateral trading system, as well as hemispheric economic integration. What is needed are FTAs, which lock-in preferences, provide meaningful market access to the exports of developing countries into the markets of developed countries and reduce the incidence of tariff escalation, tariff peaks, high tariffs and non-tariff barriers on such products. This could serve to level the playing field somewhat.

Shifting to a consideration of the role of parliamentarians from the perspective of the WTO’s Doha Development Agenda, which is the primary focus of this workshop, it would be prudent to recall that the Declaration of the 4th Ministerial signaled the launch of the much heralded and increasingly contentious `Doha Development Round’ of negotiations. The Doha Declaration itself sought to articulate negotiating mandates and imperatives in a range of issue areas. More specifically, the Doha Declaration explicitly recognised the potential role that international trade could play in the fostering of economic development and poverty alleviation, and sought to place the peculiar needs and interest of developing countries at the centre of the work programme, which has been referred to as the `Doha Development Agenda.’

Cancun gridlock

Additionally, there was a re-affirmation of the commitment to the objective of sustainable development to ensure that developing countries secure a proportionate share of the expansion of global income, which subsequently, has been estimated at US$355 billion by the year 2015. Further, enhanced market access; balanced rules; and a sustainably-financed technical assistance and capacity-building programme, were deemed important in this regard. However, five weeks away from the 5th WTO Ministerial in Cancun, the pre-Cancun post-Doha multilateral negotiations are still in a state of gridlock, which has in no small way been precipitated by an absence of accord on several issues that are central to developing economies, and the inflexibility demonstrated by many developed countries in this regard. Thus far, every major negotiating deadline has been missed. This trend has served to bring the legitimacy of the multilateral system and the WTO’s commitment to the development agenda under scrutiny.

Increasingly therefore, there have been calls for political intervention in order to break the deadlock, bringing Parliamentarians and Trade Ministers again to the fore. Although the burden of providing momentum to the negotiations has been placed at the feet of the politicians, in attempting to craft a solution the principles of the Doha mandate must by necessity be revisited. Accordingly, the mandate speaks clearly to the principle of Less than Full Reciprocity and re-affirms the important role that enhanced market access and balanced rules play in ensuring that developing countries secure a commensurate share of the growth in global trade. Clearly, the developmental goals of the Doha Round cannot be reasonably achieved in the absence of targeted, operational measures, which first seek to redress the imbalances that currently exist in the multilateral trading system, as well as provide developing countries with the requisite flexibility in policy intervention. In so doing, the convergence in wealth and development between developed countries, on which the first best argument in favour of free trade has been premised, may be finally realised.

Special & differential treatment

Fundamental to this, is the ability to provide Special and Differential Treatment (S&D) to developing countries. This could prove to be a critical deal breaker at Cancun. In this regard, a proposal floated at the recently concluded meeting of the WTO - Negotiating Group on Market Access for Non-Agricultural products, could prove useful. The proposal called for the classification of Members into three tracks, `the leaders,’ `the adjusters’ and the `new entrants.’ This is consistent with the view espoused by Trinidad and Tobago that a continuum rather than a one-size-fits-all approach to S&D would be more appropriate, given the differences in sizes, levels of development, and peculiar needs that exists amongst developing countries. Given the inability of the Doha round to generate the intended benefits to developing countries, it is important that developing countries seek to achieve an early harvest at Cancun which consists of a basket of measures that seek to address their peculiar developmental needs.

In view of the heightened role that domestic policy makers and the private sector are expected to play during the Doha Development Round, it is important that participants of this workshop make every effort to derive a better understanding of the key issues. This is advised because if the globalisation process is to be a success, they must be the major demandeurs of change within their respective countries. They must seek to play a pivotal role between the private sector, government and the citizenry, helping to inform and educate civil society not only on the challenges but also the potential benefits of the trading system. At the same time, in our capacity as legislators and members of national delegations, parliamentarians must maintain a degree of pragmatism and endeavour to craft ingenious legislation consistent with WTO rules and agreements, geared at safeguarding domestic developmental goals. This can only be achieved realistically if parliamentarians possess an intimate understanding of the multilateral trading system, the WTO and the relevant issues. Conceptually therefore, this workshop should be viewed as an opportunity to acquire the tools needed to function in this liberalised environment; that proverbial footstep along the path towards socio-economic development laid by the WTO, the Doha agenda and the multilateral trading system. Essentially therefore, regional parliamentarians must visualise the socio-economic objectives of their respective countries, which hinge on the competitiveness of strategic sectors, and determine whether these goals can be achieved in the absence of the necessary policy space and targeted multilateral provisions.