During the Doha negotiations in November 2001, many countries demanded implementing past commitments and avoid initiating a new round of trade liberalization. The demand was rejected by the governments of developed countries; instead, they pushed for greater market openings by radically reducing tariffs for their agricultural exports in developing countries. This has made the negotiation process unpalatable.
Recent development in trade liberalization shows renewed interest of the member countries moving the stalled DDR forward. However, the unresolved issues in sustaining economic growth through freer market does not seem that easy, taking into consideration the damages inflicted by the global financial crisis of 2008. Therefore, the major question in global trade dialog is how the agreement will address the interests of developing countries by raising their incomes, and also offer advantages for developed countries?
The global economy has been overtaken by a historic economic slowdown that began between late 2007 and early 2008. This has added fuel to the fire in the existing trade issues that were obstructed during DDR 2006 negotiations. As a result, there have been changes in the world economic structure. Some of these changes include China and India achieving unprecedented growth rate by integrating into the global economy; China growing as world’s second largest economy; a prolonged contraction in the US economy; and Brazil and India’s significant inclusion into G20. The share in the global output of developing countries is expected to increase from the present one-fifth to one-third in the next 25 years. Therefore, the structural change in global economy with regards to the scale and direction necessitates a thorough pre-Doha Round discourse to fine tune the final round of agreement. Nepal also needs to have a clear vision regarding its negotiating position.
There is a resurgence of regional trade agreements in the form of FTAs and bilateral trade arrangements. Literature shows 220 bilateral and regional trade agreements in existence today, and is expected to scale up to 400 by the end of this decade. FTAs, many of which are bilateral, are arrangements in which countries give each other preferential treatment in trade by eliminating tariffs and other barriers on goods. Each country continues its normal trade policies with other countries outside the FTA agreement by encouraging protectionism that may complicate the possibility of achieving multilateral agreement by consensus.
Nepal’s areas of interest include agriculture; non-agriculture market access (NAMA); services; trade facilitation; special and differential treatment (S&DT) ie, duty-free market access to LDCs products; and aid for trade (Trade related Technical Assistance). As the landless people constitute 16 percent of the population, and 57 percent own less than 0.5 hectare, many people feel incentives in agriculture sector will yield no significant results. Agricultural trade for that matter is not a panacea for most poor countries; the poorest countries may actually lose from any agreement. It is therefore, necessary to design additional measures ensuring that both the less developed and developed countries benefit.
The share in the global output of developing countries is expected to increase from the present one-fifth to one-third in the next 25 years. Therefore, the structural change in global economy with regards to the scale and direction necessitates a thorough pre-Doha Round discourse to fine tune the final round of agreement.
Since agriculture is linked to GDP growth, employment, food security, poverty alleviation and access to inclusive growth, any decision on this sector will have the multiplier effect on Nepal’s development policy, economic health and livelihood at the household level. Nepal is going through serious macroeconomic difficulties. Commercial banks are facing the problem in deposit mobilization; there is a continued Balance-of-Payment deficit. Budgetary deficit has exceeded Rs 55 billion in the first five months of the fiscal year. Therefore, realizing the fact that for the poor, the growth that originates from agriculture sector is two to three times more than the growth originating in non-agriculture sectors; attempt should be made to seek additional support to small farmers to increase productivity, quality standards, and value-addition especially in fruits, livestock and cash crops.
Some scholars have presented very significant model of global trade as a tool to analyze the potential impacts of the negotiations and underlying economic interests of the WTO’s member countries with diversified interests. Similarly, modeling unemployment in developing countries and separating agricultural labor markets from urban unskilled labor markets are the outcome of the new Carnegie Model. This results into a more accurate analysis of the impact of trade policies on both developing and developed countries. Nepal Agriculture Research Center should focus their study on these areas.
Many believe the benefits of the Doha Round to the poor have been greatly inflated. The World Bank study (Fall, 2005) showed developing countries gaining $16 billion in ten years. The poorest billion people would increase their incomes by a mere $2 per year. This is a good study but incomplete since it does not factor in many costs that the WTO regime imposes on developing countries.
By examining the projections made by WTO, UNCTAD and others the new study reveals income gains for developing countries are less than one percent of GDP and less than a penny-a-day per person. The study further shows, most gains accrue to just a few countries but poor countries lose because the cost of liberalization exceeds projected gains from the Doha Round. In this context, Pascal Lamy’s observation is relevant. He says issues still controversial are the degree and nature of benefits accrued to developed and less developed countries, ie, the interest of LDCs especially in non-reciprocal tariff preferences. However, he also believes, because of the non-discriminatory and inclusiveness nature of WTO principle, multilateral trading system offers something for everyone.
We need to diagnose the truth - if unfinished Doha Round meant foregone economic opportunities (the failure of Doha Round and market distortions through global economic crisis contributed to the decline of the volume of trade by 12 percent in 2009, which was more than the damage done by the Great Depression), or the opportunities for creating a breathing space to prepare LDCs for safeguarding their interests through the existing global system? For example, responding to LDCs demand for seeking duty and quota-free (DFQF) access, some countries have already accepted to offer DFQF under 97 percent tariff lines. We may think there is not much difference between 97 and 100 percent, but even a small number of exclusions can sharply limit the benefits of trade preferences.
Jomo Kwame Sundaram, Assistant Secretary General of the UN Department of Economic and Social Affairs citing a study conducted in Malaysia observes that a paddy farmer’s child had better nutrition than the children of a rubber farmer who had access to global markets. It indicates the difficulties in measuring socio-economic benefits from such access. Even in a developed country like the US, an increase in GDP could not reduce the number of poor but made people worse off than a decade ago.
This is the reason why the DDR rejects “one size fits all” approach and makes core negotiating agenda of the forthcoming Doha Round to raising global levels of Aid for Trade and improve trading conditions for the LDCs.
bishwambher@yahoo.com
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