Market access on ‘essentially all’ products for LDCs. This was not a new stunt; it was a replay of the PR (public relations) job that the developed countries were attempting to pull-off in Seattle. The stunt evaporated as the Seattle talks crumbled. At UNCTAD X, we saw round two of this act.
For example, in claiming to speak for the interest of the developing world, and therefore recommending that WTO members push ahead to reconvene a new trade round, Clare Short, IK Secretary of state for International Development said that the UK is pushing for ‘minimum exceptions in the EU position’ in the area of duty free access for all imports from the LDCs.
But the reality is that neither the EU nor the US position on market access for LDCs will be a big sacrifice on their part. The wording that was heatedly debated is in Paragraph 130.3 of the UNCTADX Plan of Action which reads as follows:
‘UNCTAD’s work should relate to analysis and consensus-building on:
[Maximizing market access benefits for the least developed countries] [Granting by developed countries of duty-free [and quota-free] treatment for [essentially] [all] products originating in LDCs, [and the contribution to improved market access for LDCs’ exports by other developing countries,] combined with a multilateral and bilateral programme to upgrade LDCs’ production and export capacities and capabilities.]’
Various members of the EU as well as the US did not budge from the position that there will be duty-free and quota- free treatment for ‘essentially all’ products originating in LDCs. This basically allows the developed countries to retain restrictions on their markets in very sensitive products.
The NGO agricultural caucus, in the attempt to show how developed countries were trying to pull off a PR stunt on what amounted to little or no new concessions on their part, called a press conference on Wednesday, 15 February, with the message that ‘essentially all = essentially none’. That for most countries, there will be no additional market access concessions than the present existing unsatisfactory arrangements.
Indeed, an African Ambassador, unimpressed by this PR attempt said, ‘They are telling us to be grateful for what we already have’.
In the multilateral trade world, this market access issue is in fact an old and sore point for developing countries. It is a well-known problem that the WTO has legitimised the tariff peaks and escalations developed countries continue to maintain in sectors where developing countries are more competitive, such as agriculture, textiles and footwear. Tariff peaks are abnormally high tariff rates common in those products the North produces.
Tariff escalations are high tariffs which developed countries impose on developing country products which are processed. This structure of tariffs ensure that the South continues to export raw materials to the North, and is unable to diversify or ensure higher earnings by selling processed products. They effectively bar developing countries’ processed agricultural products from competing in the markets of the developed countries.
As Ambassador Rana of Kenya pointed out at a discussion on the WTO, Kenya can easily export raw coffee beans to the North but as soon as Kenya processes its coffee beans, markets are closed because tariffs rates are impossibly high.
In agriculture, the products with the highest frequencies of tariff peaks and tariff escalations are in the major agricultural staple foods – meat, sugar, milk, butter, cheese and cereal. These are the products that are in most widely consumed.
FAO figures show, for instance, that the tariff rates for three major cereals, wheat, maize and rice for developing countries are 94% for wheat, 90% for maize and 89% for rice. In contrast, the OECD average in 1995 was calculated at 214% for wheat, 197% for barley, 154% for maize and 11% for rice. Therefore, with the exception of rice, which is not a major export crop in the OECD countries, their bound tariff rates committed to the WTO are about twice as high as those of the developing countries.
According to FAO’s tariff escalation index, post-Uruguay Round rates for some major agricultural products in the developed country markets are as high as 44% for wheat flour and 25% for orange juice in the EU; 30% for refined sugar and 12% for roasted coffee in Japan; 13% for soya bean oil and 42% for condensed milk in the US.
Therefore, although food processing is a major export industry of developing countries, their exports are largely concentrated in the first stage of processing. More advanced food industry products make up only 5% of the agricultural exports of LDCs and 16.6% of those of developing countries as a whole, against 32.5% for developed countries.
In the US, some of these high tariff rates for both the agriculture and textile sectors have remained unchanged since the 1940s. Clearly, retaining the words ‘essentially all’ means preventing access to the key products in which developing countries are more competitive. Therefore, while the North maximised the public relations potential in this market access issue, what they offered was no more than crumbs to LDCs off the rich man’s table.
Market Access Fudges the Real Development Needs of the South But the REAL danger of this market access issue is that it fudges the real development needs of the South. There has in fact been a slight shift in the terms of debate on globalisation post-Seattle, as compared to pre-Seattle. This was evident at UNCTAD X, where heads of UN agencies, Mike Moore, and country delegates from the North dressed up their agendas around the need to include the marginalised. Hence phrases such as ‘globalisation with a human face’ from Mark Malloch Brown, Administrator of UNDP and ‘Lifting a billion people out of poverty’, recited by both Mike Moore and Clare Short.
However, despite seemingly good intentions, their prescriptions around more market access, remain sorely inadequate in comparison to enormity and nature of the problem.
This limitation and short-sightedness was also keenly evident in the commodities workshop held at UNCTAD X to address the problem of the collapse in commodity prices. The two main recommendations coming out from the workshop were the need for more market access and for diversification by developing countries. As one commentator said, these solutions are no different to what was proposed in the 1960s.
The market access solution, in my view is limited in its benefits to only some sectors within some countries. There are many other countries (the ones that are especially marginalised by the world trading system) that have supply-side constraints, and are in no position to compete in the world market. More market access opportunities are therefore of no real use to them. Then there are those countries and sectors whereby market access opportunities may be a short- term solution, but in the long term, may be destructive to their local economies.
Indeed, it is the short-sightedness of the neo-liberal economic theory, which encourages exports as the engine of growth, hence the importance of market access. For countries that do follow this track, including the newly industrialised East Asian economies, growth rates may burgeon, the middle class may growth in number, but the income gap also widens. Those in the lower ranks of the economy become even more marginalised, and often, this process has a female face.
In pursuing the export path to growth, two processes usually take place. One, environmental resources are often over- utilised in order to obtain the cheapest, most competitive prices. Two, human resources are abused likewise. For instance, the exploitation of cheap female labour in export processing zones.
Some studies have shown that for $1 earned in exports, up to $10 dollars of costs are borne by the local community. Whatever the exact figures, the point is that in the race to the bottom (of prices) in an increasingly competitive global market, the South is exporting away its environmental, natural, and human resources at below cost. The burden — environmental and social costs — are left to local communities to deal with. Small wonder that this type of economic ‘globalisation’ leads to the marginalisation of some sectors of society.
If UNCTAD and the global community wants to deal seriously with the real development needs of developing countries, development, not trade, must be the central objective. The needs of development must be paramount, and trade should only be a tool for development. Developing countries need a WTO that is more flexible and responsive to their needs. A WTO, for example, which provides countries with much greater national policy space to put in place the necessary trade policies (such as local content requirement, flexible tariff rates, subsidies, government procurement policies) and which allows countries to chose which agreements they want to be party to, rather than enforcing a single (all or nothing) undertaking.
