Developing Country Trade Issues: Market Access

1 December 1997

`When we talk about market access we can bring out all kinds of economic arguments regarding access to developed country textile markets and so on but as long as issues relating to power are not addressed there is no way we can bring about changes in the relationship between the North and the South,' Professor Yash Tandon of the International South Group Network commented on opening the session on market access during the joint ICTSD-CUTS roundtable on developing country trade issues. The cluster Professor Tandon was chairing focused on tariff escalation, agriculture and textiles.

Tariff escalation

To initiate debate, Dr Basudeb Guha-Khasnobis of the Indira Gandhi Institute of Development Research pointed out that while tariff rates had generally declined as a result of the Uruguay Round, there had been little change in tariff escalation. For instance, in a market where the tariff for raw leather is 1.8 percent, that for finished products is 4.1 percent. No tariffs are levied on jute fiber, but jute fabric has a tariff of 3.2 percent. Compared to pre-Uruguay rates, current tariff rates reflect a 38 percent reduction in escalation between semi-manufactured goods and raw materials but only a 23 percent reduction in escalation between finished goods and semi-manufactures.

Dr Guha-Khasnobis saw the recent `phenomenal' increase in many Asian countries' raw materials exports at the expense of finished goods exports as indirect evidence of tariff escalation. He highlighted the dangers of excessive reliance on raw materials exports for long-term development; for instance, he said, economic dependence on agro-based products puts countries at the mercy on climatic conditions, while an export strategy focused on natural resources may push them to over-exploit their exhaustible resource base.

Dr Guha-Khasnobis demonstrated the negative impact of tariff escalation on developing countries' balance of payments as it prevents them from exploiting their natural comparative advantage in exporting  labour-intensive products. He also called for more analysis on non-tariff barrier escalation.

Agriculture

Colombia's Ambassador Nestor Osorio Londoño, Chair of the WTO Committee on Agriculture, introduced the debate on agriculture. Referring to Professor Tandon's opening comments, he reminded the audience that the most powerful agricultural countries were also the most protectionist. He conceded, however, that in spite of the numerous trade barriers that still remain, the Agreement on Agriculture constituted a starting point towards agricultural liberalisation. He highlighted many problems of particular importance to developing countries, including food security and the fact that most developing countries exporting agricultural goods had not managed to cross the gap from primary goods to value-added products. Since this was largely due to developed countries' imposing restrictions on processed goods (for instance through escalating tariffs) in order to generate the value-added income themselves, he said many developing countries could be considered as `contained' developed countries.

Regarding new agricultural negotiations in the WTO, Ambassador Osorio Londoño predicted strong pressure from the Cairns group for the elimination of subsidies in the European Union and the United States. With the entry of Eastern European countries to the Union, the subvention budget is expected to grow from 8.6 billion Ecus to 13 billion Ecus. As the US, the EU needs to reform its agricultural policies and diminish subsidies to achieve a balanced budget.

Developing countries could also exert pressure for reducing these subsidies. But to ensure that the liberalisation process works in their favour, they must be well-prepared for the negotiations, clearly identify their interests  and create alliances. The best approach would be global negotiations (the `single undertaking' advocated by Ambassador Lacarte Muró, see cover story) rather than sectoral negotiations. There is also a need for analysis of the WTO Agriculture Agreement's impacts on developing countries that non-governmental organisations could contribute to. He stressed that in many Southern countries, agricultural imports had risen sharply at the expense of exports and local agriculture, giving rise to serious social and political problems. The relationship between multilateral rules for agriculture and commodity prices merited more careful attention, Ambassador Osorio Londoño emphasised.

Textiles

Mr Munir Ahmad, Director of the International Textiles and Clothing Bureau, commented on key issues in the sensitive textiles sector. World textile exports are worth US$310 billion a year and represent between 20 and 68 percent of developing country exports. The WTO Agreement on Textiles and Clothing stipulates that all quotas on textiles must be removed by 2005, thus bringing this sector back to the mainstream of traded goods after decades of special restrictive treatment under one treaty or another. However, for the moment tariffs on textiles and clothing remain much higher than those levied on other industrial goods and are subject to a high escalation rate. As for quotas, only an insignificant number have been lifted during the first implementation period (from 1995-1998). Market access would also be significantly enhanced by improvements in the WTO provisions on rules of origin and customs procedures. In conclusion, Mr Ahmad called for a better understanding of the role of textiles in the development process.

Discussion

During the ensuing debate, many participants denounced developed country protectionism: real negotiations on liberalising trade in agriculture will not start before the year 2000 and  the implementation of the WTO Agreements on Textiles and Clothing is progressing far too slowly. Non-tariff barriers such as quality, health and safety standards, as well as social and environmental labels or anti-dumping measures are also considerable obstacles. A question arose as to what extent it was realistic to expect further liberalisation in OECD countries who were facing rising unemployment and budget constraints. The panelists saw the elimination of protectionism in the North mainly as an adjustment process whereas for the South access to Northern markets was a question of development and survival. Opinions differed widely over whether `triggering' development was needed before `sustainable' development could be envisaged. Some speakers thought better market access was vital for getting the development process off to a start, thus allowing countries to generate funds necessary for environmental protection and social programmes.

Regarding agriculture, participants noted that the tarification of trade barriers had sometimes led to more protectionism, not less. Tariff peaks were common for too many products of export interest to developing countries. For net food-importing countries, many raised food security issues and the persistent question of external debt. Looking at the agricultural negotiations ahead, the debate focused on the options available to developing countries regarding political forces and possible alliances (APEC, Cairns, regional alliances, etc.).

Participants also questioned the benefits of trade liberalisation to developing countries and countries with economies in transition: with the end of commodity agreements  brought about by the Uruguay Round  many countries lacking the means to profit from better market access face increased competition and often high social costs.

Finally, participants highlighted the need for more analysis from the WTO, UNCTAD and NGOs to assist developing countries in defining their interests, preparing for negotiations or evaluating the impacts of WTO rules and liberalisation on their development.

At the end of the session, the Chair summarised the issues, grouping them according to four levels of complexity: first, technical questions such as market access, rules and their impacts; second, the leeway for negotiation regarding agriculture and textiles, including the powers that must be reckoned with and negotiation options; third, the importance of changing paradigms and approaching the issues from a perspective of long-term development; and, finally, existing alliances and those to be formed, particularly among developing countries.

Christophe Bellmann is Coordinator for Development Policy at the Swiss Coalition of Development Organizations in Lausanne, Switzerland.

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