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Nadia
Joined: Apr 2, 2003
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Thoughts on international trade
July 29, 2003 - 05:14 AM
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Let me state my thoughts on international trade which means open markets.
At the beginning of this Millennium, one in five of the world’s population - 1.2 billion people; two-thirds of them women and girls - live in extreme poverty, without adequate food, water, sanitation, healthcare or education for their children.
But we also live in a world of expanding technological innovation and capital which has generated abundant wealth and prosperity. Current levels of poverty and inequality in the world are the biggest moral challenge humanity faces. The elimination of poverty not only has a moral justification but is now one of increasing self interest. If we do not make considerable headway to reduce inequality, it will lead to growing conflict, refugee movements, environmental degradation, disease and natural disasters. With a global population of six billion which could top eight billion within a generation, without action we face unknown instability and danger to future generations wherever they live.
As you know the development community has endorsed a series of development goals; as well as the commitment to reduce the proportion of people living in poverty by half; ensure that every child is in primary education; that infant, child and maternal mortality is reduced; that reproductive health services are provided for all and the loss of environmental resources is reversed - all by 2015.
For me, the key theme on this issue is trade and i believe that there are two major reasons why.
The first of these is the need to ensure coherence in economic development policy-making. It is vital that development policies are mutually supportive. Trade is an essential component to ensure the success of other development assistance. For example, take the case of the HIPC II initiative. The enhanced HIPC initiative announced in 1999, should lead to the cancellation of two-thirds of the debt owed by HIPC countries that qualify for debt relief. For the current 22 countries this will amount to $50 billion of debt relief. Clearly debt relief for the HIPC countries is important to remove the overhang of unpayable debt that blocks their development, but it is not enough to put these very poor countries on the path to development. It is very important that once a country has received its debt relief, it avoids running up huge debts again. Indeed to ensure medium-term financial viability under the supporting programmes for the HIPCs, in the majority of countries, export growth rates and economic performance must move significantly beyond historical rates to achieve sustainability. This is not an outlandish expectation. One would expect that under their poverty reduction and strategies, countries should be able to move beyond these historical rates. But it underlines the fact that increased trade for the poorest countries is essential to their success. In reality no amount of HIPC debt reduction or official development assistance can guarantee that we will reach the international development targets and poverty reduction goals.
It is clear that we can not achieve systematic and sustained poverty reduction without economic growth. Economic growth is essential to generate additional resources to redistribute. Stimulating growth is a complex subject, and ODA can be a useful tool to generate higher growth. However, the needs are so great that no imaginable increase in ODA, however effective would be sufficient to meet the needs.
The second reason why trade is vital for development policy is the material and cultural benefits which are enjoyed by open societies that learn from and trade with others. In recent decades, it is those countries which have seized the opportunity offered by more open world markets to increase exports and attract inward investment that have made the greatest strides in reducing poverty.
However, there is no doubt that the poorest have been marginalised. The share of the poorest countries in global trade has declined from 0.8 percent in 1980 to 0.4 percent today. To make progress in reducing extreme poverty, the poorest countries need to be drawn into the global economy and increase their access to modern knowledge and technology. The interlinkages between trade and development to poverty reduction are crucial to the LDCs but obviously important to all developing countries.
It is within this context that "mainstreaming trade" needs to be considered in the course of today’s discussions. Mainstreaming trade into a country’s development strategy means assessing the importance, prioritising and integrating a range of policies in order to increase trade; it does not solely mean helping countries to implement WTO agreements and sometimes complex ones at that.
I want to suggest that there are four elements that need to be assessed in a trade integration strategy:
- trade reform by developing countries under a pro-poor agenda;
- assessing impediment to market access;
- establishing the benefits of WTO, and global rule making to developing countries: and
- strengthening the capacity of developing countries to trade.
There are those that wish to focus on trade reform and liberalisation in developing countries and others that may wish to concentrate on market access issues. But in reality we have to recognize that to leave out any one element is in fact to deny a coherent and comprehensive approach to development.
Much has already been achieved in terms of trade reform. However, traditional trade barriers continue to be high in some regions and particularly in LDCs. In addition the efficiency of the service sectors is a major determinant for development and therefore liberalisation of trade and investment in services should be a key element of policy reform, including efficient and well-regulated financial, telecommunication and transportation sectors. Research has shown that the gains from eliminating barriers to trade in such services can easily far outweigh those associated with merchandised liberalisation alone.
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Nadia
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continue from the previous post
July 29, 2003 - 05:16 AM
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But trade reform alone is not enough. Evidence shows that trade liberalisation and openness does have a beneficial impact on economic growth, and on average economic growth does benefit the poor proportionately and thereby helps to reduce absolute poverty. But let’s be clear, not everyone benefits from trade reform, and there are significant variations about the average. These variations are likely to reflect how trade reform was undertaken and therefore complementarity and sequencing of policy are essential to its success.
What are these complementary policies? This is not an exhaustive list but from the research we have to date, they can include the following:
- an appropriate macro-economic framework is essential - obviously an overvalued exchange rate or high inflation makes trade and market liberalisation much more difficult to implement;
- liberalisation of trade and investment and particularly in services requires appropriate legal, regulatory and financial institutional structures; obviously any adverse impact on government revenues will require domestic tax reform to ensure adequate public sector resources;
- the impact of trade reform on agriculture must be assessed - traditionally a sector where the poor are located. A key issue is the ability of farmers to respond to changes (both positive and negative) associated with trade reform;
- land reform to improve agricultural performance and mitigate urban migration may be necessary;
- it has been found that trade liberalisation can in fact harm the low-skilled and hit the poor disproportionately hard with the wages for skilled labour increasing relative to those of unskilled. Therefore investment in training to increase the supply of skilled labour can be important;
- and finally where privatization is undertaken it needs to be properly managed to ensure access of services to the poorest.
To mainstream trade into a country’s development strategy there must be an assessment of possible barriers to access by that country. Despite progress, there are still areas, such as agriculture and textiles and clothing, where developing countries face high tariff and non-tariff barriers. From recent research, developing countries stand to gain up to $150 billion - 3 times what they get in aid - if tariffs are cut by half.
A message that we must emphatically send out, is that anyone that really cares about developing countries needs to ensure that the next trade round is a development one, that will secure significant market access improvements for developing country products.
Market access issues extend beyond traditional tariffs; contingent protection (notably anti-dumping) has increased both in developed and developing countries; product standards and technical regulations can also be another source of market access barriers. It is reasonable that consumers are pressing for more information on products and tighter safety and hygiene standards. However, developing country exporters find the proliferation of regulations and standards hard to comply with. A balance needs to be struck which provides adequate information and quality to consumers but which enables developing countries to export and grow their way out of poverty.
If we are serious about ensuring that trade liberalisation brings broad-based economic benefits we in the north must lead by example. We must address northern protectionism and we can easily afford to do so.
The third element to mainstreaming trade for developing countries is to realize the benefits of WTO membership and global rule making to developing countries. Support for open trade is not to be confused with unregulated trade. On the contrary if open trade is to work for the world’s poor we need effective multilateral trade rules made by an institution in which developing countries are properly represented and an institution capable of enforcing these for poor countries and rich countries alike. But we must recognize that WTO members are at different stages of development and new WTO rules must reflect countries’ implementation capacity.We need to strengthen the capacity of developing countries to participate effectively in the WTO and take advantage of the new trading opportunities. That is why we are committed to double our support in this area from £15 million over the last three years to £30 million over the next three years.
However, strengthening the capacity of countries to trade needs to be linked to the country’s overall development strategy. Capacity building needs to encompass a range of elements including improving the institutional and regulatory environment, efficient customs administration as well as addressing export related infrastructure and bottlenecks particularly in transportation. We intend to increase our support for trade-related capacity building. However, to ensure assistance is effective it has to be undertaken in collaboration with other providers and firmly linked to the development priorities of the country concerned.
I fully support the current initiative for the Integrated Framework and will be making a contribution of $500,000 to its Trust Fund. Its intention is to promote the mainstreaming of trade into a country’s development strategy such as the Poverty Reduction Strategy Papers (PRSPs) or United Nations Development Assistance Frameworks (UNDAF). Support will enable the LDC, assisted by the World Bank and IMF, to devise a trade integration chapter for effective participation in the global economy. This chapter would encompass a number of issues, including establishing the link between trade and development and poverty reduction; the impact of trade reform on economic growth and development in the country; market access issues; and an assessment of the trade-related capacity requirements of LDCs. The trade integration chapter will include the identification and prioritization of trade-related requirements from infrastructure to human resources within a coherent policy framework.
Although this is on a pilot stage basis, with just a few countries, i hope that all of us can work towards its success and that its key objectives can be applied more widely.I strongly support this initiative. Capacity building needs by non-LDC developing countries are as great. I believe that these should also be addressed as part of a comprehensive process that reduces the multiplicity of vertical initiatives.
In summary, to make today’s discussions productive I believe we need to reflect on the following; one - trade openness is a necessary but not sufficient condition for poverty reduction and achieving the IDTs; two - the extent to which trade openness can make a real contribution to poverty reduction depends on the broader economic and social circumstances and complementary policies; and three - trade needs to form a part of a coherent approach to economic development policy making by donor governments and effective development assistance must support the overall development strategy of the country concerned.
What do you think?
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Elizabeth
Joined: Jul 1, 2003
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Wowa!!!
August 2, 2003 - 03:51 AM
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I think you are both Bloody brilliant, that is what I think. I also think that I will leave it to you two to debate on your heated topic.
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