Identifier
Created
Classification
Origin
05PRETORIA4757
2005-12-02 15:04:00
UNCLASSIFIED
Embassy Pretoria
Cable title:  

SOUTH AFRICA: SPEECH ON RECLAIMING THE

Tags:  ETRD ECON SF XA 
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UNCLAS SECTION 01 OF 04 PRETORIA 004757 

SIPDIS

E.O. 12958: N/A
TAGS: ETRD ECON SF XA
SUBJECT: SOUTH AFRICA: SPEECH ON RECLAIMING THE
DEVELOPMENT CONTENT OF THE DOHA DEVELOPMENT ROUND

REF: NONE

UNCLAS SECTION 01 OF 04 PRETORIA 004757

SIPDIS

E.O. 12958: N/A
TAGS: ETRD ECON SF XA
SUBJECT: SOUTH AFRICA: SPEECH ON RECLAIMING THE
DEVELOPMENT CONTENT OF THE DOHA DEVELOPMENT ROUND

REF: NONE


1. (U) Deputy Minister of Trade and Industry Dr. Rob
Davies delivered the following speech entitled:
Reclaiming the Development Content of the Doha
Development Round. Davies delivered this speech to
the National Consultative Conference on the WTO
Ministerial in Hong Kong on 17 November, 2005. The
text of this speech is provided below.

Begin Text:

Reclaiming the development content of the Doha
Development Round by Dr Rob Davies Deputy Minister of
Trade and Industry

17 November 2005

Recent proposals by some major industrial countries
in the World Trade Organisation (WTO) are threatening
the developmental content of the Doha Development
Agenda (DDA). These proposals seek both to sow
division among developing countries and to re-
interpret the framework and trajectory of the
negotiations that in a self-serving manner, narrow,
limit and ultimately - undermine the developmental
objectives of the DDA. It is thus timely to reclaim
the developmental content of the Round.
The Ministerial Declaration that launched the Doha
Round proclaimed that the needs and interests of
developing countries, who make the majority of WTO
members, would be placed at the centre of the
negotiations. This was not an act of charity but was
based on an understanding that promoting development
in developing countries is an essential impetus to
sustained global economic growth from which all
countries can benefit. A key to sustained global
growth lies in unlocking the growth potential of
developing countries and we have consistently argued
that, to achieve this, developing countries must
pursue economic development and industrialisation in
sectors where they possess comparative advantage. The
strategic objective for the negotiations is thus for
industrial countries to undergo structural adjustment
by reducing a range of protective and support
measures in inefficient sectors in their economies.
Such adjustment will open up new flows of trade and
investment, promote industrialisation, trade and
development in developing countries and establish a
virtuous cycle of global economic growth.

An early conclusion of the current round of
negotiations, consistent with the mandate agreed in
Doha in 2001 would deliver the best overall context
for such an outcome. More open and undistorted

international trade would create an environment in
which developing economies may diversify their
exports by destination and in higher value production
and deepen their integration into the global trading
system. These were the strategic considerations that
underpinned South Africa?s support for the launch of
negotiations in Doha in 2001. In reclaiming the
development content of this round of negotiations in
the WTO, we also need to reassert the essential
principles of proportionality, asymmetry, less than
full reciprocity and special and differential
treatment in favour of developing countries. These
principles underpin South Africa?s approach to
development and are expressed along three main
dimensions.

First, the DDA must provide enhanced access to
industrial country markets for the exports of
developing countries. This should cover exports in
agriculture, industrial goods and services. On
industrial tariff negotiations, the developmental
objectives of the round require the reduction and
elimination of tariff peaks and tariff escalation on
products of export interest to developing countries.
While the average tariff rate in industrial countries
are low, the level and the frequency of tariff peaks
(higher than 15%) and escalation (tariffs that
increase with value added) remain a matter of concern
in a number of key sectors of direct interest to
developing countries. In general, the growth of
industrial exports from developing countries to
industrial countries is inversely related to the
degree of tariff protection in the latter. The
critical issue is how fast producers in the North
move out of these sectors where they have lost
comparative advantage.

Developing countries are prepared to make a
contribution to the industrial tariff negotiations in
this round, provided that their concessions are
commensurate with their levels of development in a
full expression of the principle of special
differential treatment. This is essential to ensure
that the reform processes are carefully managed for
sectors that are for employment or industrial policy
reasons. Thus, negotiations on industrial tariffs
must accomplish two things simultaneously: (i) ensure
that the remaining high tariffs, tariff peaks and
tariff escalation in developed countries are
eliminated and (ii) ensure sufficient flexibility
that accommodates the sensitive sectors and
adjustment needs of developing countries.

Second, the removal of anti-development structural
distortions in international agricultural trade is a
central objective of the DDA. Through a combination
of high tariffs, massive domestic support and export
subsidies, industrial countries are able to retain
inefficient agricultural production at the cost of
promoting agricultural development in developing
countries. At the same time, developing countries
cannot be expected to pay for this needed reform in
agriculture by acceding to overly ambitious demands
by industrial countries for concessions in industrial
tariffs and services that do not take into account
the realities of their levels of economic and
institutional development. Larger economies,
responsible for most distortions need to make the
larger adjustments.

Third, it must be acknowledged that not all
developing countries stand to gain from the DDA in
the short to medium term. Indeed, least developed
countries (LDCs) and small, weak and vulnerable
countries do not have the supply capacity to obtain
the benefits that will arise from new export
opportunities of the DDA. Moreover, many will face
significant adjustment costs including from the
erosion of preferences. An ?aid for trade? package
should be established to address these concerns. For
those economies that face adjustment costs,
assistance must be provided to cushion the negative
effects of the reform process. Assistance will also
be required to advance efforts at diversification and
competitiveness in order to take advantage of new
trade opportunities in the medium term. The programme
could also focus on building capacity to meet
international product standards as well as any new
WTO obligations that emerge from this round (trade
facilitation, for example). For LDCs, a package of
specific measures to foster their integration into
the world trading system is required particularly
that industrial countries make a commitment to grant
LDCs duty free quota free market access.

Recent developments

The WTO Mini-Ministerial held in Geneva on 8-9
November was considered important to provide further
impetus to negotiations in advance of the 6th
Ministerial Conference in Hong Kong scheduled for 13-
18 December 2005. This followed a meeting on 10
October 2005 where the United States (US) submitted
its agricultural proposal. This was a significant
move by the US because agriculture has always been
understood as the key to unlocking progress across
the DDA. The US offer generated momentum in the
process but deeper analysis indicated that it did not
meet the objectives of the Doha mandate for
substantial reductions in domestic support. Although
it was inadequate, as an opening gambit, the proposal
set the stage for further engagement and
negotiations. On 12 October 2005, the G20 submitted
its detailed proposal indicating a range of targets
for agriculture. The proposal was balanced - a
genuine middle ground - that aims to eliminate export
subsidies and achieve substantial, real reduction in
the trade distorting domestic support provided by
industrial countries to their farmers.
Tariff reduction in the agricultural sector offers
over 90% of the overall benefits for developing
countries that would arise from a combination of
subsidies elimination, reductions in domestic support
and lower tariffs. In this respect, the G20 proposed
a reasonable target for agricultural tariff reduction
in industrial countries (54%) and offered 36% tariff
reduction for developing countries on the basis of
fundamental principles underpinning the negotiations
- special and differential treatment and less than
full reciprocity for developing countries. Following
the proposals by the G20 and the US, the European
Union (EU) came under considerable pressure to make
its proposal as soon as possible. At the Zurich
meeting, the European Commission (EC) made an
improved offer on domestic support reduction and
indicated it would submit a comprehensive response by
27 October 2005. Between the Zurich meeting and 27
October 2005, the EC came under severe pressure from
some EU Members to remain within the mandate and
framework set by its agreed reform of the Common
Agricultural Policy (CAP) reform.

On 27 October, the EC submitted its proposal that has
precipitated the current impasse in the negotiations.
Whereas the US proposed to reduce tariffs by an
average of 75% and the G20 proposed 54%, the EU
offered only a 45% reduction along with a series of
caveats that would, by all accounts, empty their
offer of any meaningful content in the most important
aspect of the agricultural negotiations. Furthermore,
the EU made its offer conditional on a series of
demands that imply enormous adjustment burdens on
developing countries particularly the so-called
advanced developing countries (India, Brazil, China,
South Africa among others) in the areas of industrial
tariffs and services.

While offering ?constrained flexibility? for
developing countries, the EU proposed a 10% ceiling
of industrial tariffs for both developed and
developing countries. This would have the perverse
effect of requiring massive tariff reduction by
developing countries but minimal adjustments for
industrial countries whose tariffs levels are already
low (3-4% average). Though not alone on services, the
EU has explicitly proposed that developing countries
meet certain predetermined numerical targets and
benchmarks in making commitments in the services
sector. This would eliminate existing flexibilities
for developing countries and would fundamentally
alter the accepted negotiating format for services
negotiations. Moreover, the proposal reflects a
profound insensitivity to real world conditions in
developing economies not least that service
regulations in developing countries are evolving
through ongoing assessments - in a dynamic manner -
to ensure they meet a complex set public policy
objectives.

The EU proposal in fact goes beyond the negotiating
mandate agreed in Doha. The EU also called -
implicitly - for further differentiation among
developing countries (so-called advanced and
vulnerable developing countries) and re-introduced
the issue of Geographic Indications. Both issues
polarise the WTO membership. Finally, contrary to
spirit of any negotiation at this stage, the EU
indicated that this was its final offer for Hong
Kong. In retrospect, the EU proposal and subsequent
engagement appears designed to cause impasse because
of an extremely limited negotiating mandate in
agriculture. Following the meeting, it appears the EU
has managed to shift - or at least share ?
responsibility for the impasse. The impression is
being created that the impasse is a result of
intransigence - in equal measure - by several WTO
Members. It is this distortion of perspective on the
process that needs to be corrected.

Way Forward

The prospects for the 6th Ministerial Conference in
Hong Kong do not appear promising. WTO Members are
keen to avoid a re-run of the Cancun debacle. At this
stage there are two possibilities. First, the EU
makes an improved agricultural offer and reduces its
ambition in industrial tariffs and services in
advance of the Hong Kong Conference. This appears
unlikely. Second, expectations for Hong Kong may have
to be effectively managed. In this respect, the key
objectives would be four-fold: (i) to avoid a
complete breakdown of negotiations and recriminations
as had happened following the failure in Cancun; (ii)
to capture and consolidate the considerable and
important work that has been undertaken in the last
year through a status report to the Conference; (iii)
to deliver some tangible benefits for the poorest WTO
members with some decisions in favour of least
developed countries (LDCs),an agreement on the ?aid
for trade? package and a final solution on the TRIPS
and Public Health issue and (iv) to agree to continue
and intensify work in 2006 without compromising the
Doha mandate.

Development must remain the essential measure for
defining success in this round of WTO negotiations.
This should be understood as providing enhanced
access to the goods and services exports of
developing countries and removing the structural
distortions in agriculture through the elimination of
export subsidies and substantial real reductions in
domestic support. Developing countries will make a
proportional contribution by reducing barriers to
trade in a manner that is consistent with their level
of institutional and economic development. For the
weaker and more vulnerable economies, a package of
measures under a strengthened aid for trade package
should be implemented to meet transitional adjustment
costs and to boost their capacity to take advantage
of new trade opportunities in the medium term. The
immediate obstacle to meeting these objectives is the
EU failure to make a meaningful offer on market
access in agriculture.

Issued by: Ministry of Trade and Industry
17 November 2005
Source: Department of Trade and Industry
(http://www.dti.gov.za)


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