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INTEVIEW: PASCAL LAMY: `Size of fish in the pond has grown`
2007-10-02 09:51:35
By BERNARD MAPALALA
The Director General of the World Trade Organisation, PASCAL LAMY, is currently in Dar es Salaam to participate in the Aid-for-Trade conference that is also attended by the World Bank Vice President Ms Ezekwesili and former UN secretary general Kofi Annan. The Guardian`s deputy managing editor BERNARD MAPALALA had a chance to interview the WTO director general on the conference agenda and other world trade issues. Excerpts:
QUESTION: Your meeting in Dar es Salaam is the third high level review, following the previous ones you held on Latin America and Pacific Asia. You will be focusing on mobilizing aid trade for Africa. Is the Aid-for-Trade Initiative a practical idea? Are you sure that the key players that you brought together will talk the same language? Are you not simply putting strange bedfellows together?
ANSWER: Our core business in the World Trade Organisation is trade opening through rules making, the regulation of international trade tariffs, non tariff barriers, subsidies…and we do that with our usual clients-the trade ministers-who negotiate under the guidance of their governments; and this is all about making trade possible.
Making trade possible is one thing, that is, creation of opportunities, improving the level of playing fields, so that countries can trade in a fairer way.
Things like subsidies, providing more access markets, (having) lower tariffs… Once you have done that, you are able to create trade flows. However, using these opportunities is for others, not the regulator.
The opportunity is for business, planning ministries, micro strategists. And to answer directly your question, the very purpose of this Aid-for-Trade meeting, which will convene all the big players worldwide, is precisely to put unusual suspects around the table.
We have to make sure that, at the end of the day, we would be putting pressure on the donors. Whether they are bilateral, Japan, World Bank, UNDP, UNIDO and so on. We want to see the developing countries on the receiving end.
Trade people will talk to development people, to infrastructure people, agriculture people, to finance people.
At the end of the day, in order to mobilize more aid resources, we need more stable domestic priorities. There is also the regional dimension, whether be it Africa, Latin America or Asia.
Q: What is this regional dimension?
A: It is a combination of domestic agendas, but with strong regional development component. In today’s planet, the relevant market size is no longer 20 or 30 million.
The relevant market size in today’s planet is in the order of 90 to 100 million. The size of the fish in the pond of international trade is not what it used to be 20 or 50 years ago, when it was 10 or 30 million people.
Q: So if you take the portion of African trade in relation to global trade, the volume of African trade is almost irrelevant, isn’t it?
A: It is a very small proportion, which flows from low trade flows between African countries and the rest of the world, but it also stems from very low trade flows between African governments.
The East Africa Region is a bit of a specific case. This is a place in the continent where there is relatively important regional trade although it could have been bigger.
The whole process is about establishing common trade standards, having more harmonized trade policy, establishing trade corridors that can link Rwanda, Kenya or Tanzania…That the clearing of a container using Dar es Salaam or Mombasa harbour doesn’t take three weeks.
Q: If you want to be open, do you think that we are making a head way towards that direction? Do you see us removing internal trade barriers?
A: I think that the problems have been well identified by now. Governments in the region are working towards that direction. We can help through what we do in the WTO—mobilising aid for trade, which is a coordinating task.
We can also negotiate trade facilitation, which is, slashing down red-tape, simplifying customs procedures through multilateral rules, which will raise the standard of facilitation. If it takes three weeks to move a container through a local customs administration, it is a terrible cost for the importer.
In Denmark, it takes five hours to clear a container. In some African countries, it takes three weeks. So we have to look at the real obstacles to trade, things which create bottlenecks.
This is what we are trying to do through the regular terrain, creating multilateral disciplines which people would accept and lock in their behaviour. Next time, they would do better.
Q: Taking into account what you are saying, you are just able to bring the donkey to the water.
A: That is absolutely right, and it works sometimes…There is a very diverse trade capacity building which you have to address. That is why the director general of the World Animal Health Organisation is here with us.
This guy has formidable strategies on treating animal diseases. It is also important to bring in the expertise of the World Customs Organisation.
It is these guys who have expertise in customs automation, which is a big way forward. On the other hand, automating your customs is not cost free. That is where the World Bank and the African Development Bank-where the money is-come into focus.
Q: You aim to empower developing countries to take advantage of trade openings. There has been an outstanding grievance concerning an unfair international trade system, whereby the major component of Africa`s exports is raw agricultural produce, whose price is set by the buyer, not mentioning the import quotas.
The major economic powers are enjoying this arrangement. Will you address this issue, or will you simply go around the problem?
A: We have got two issues which we are confronted with in the WTO. First, we have been negotiating a part of international trade which we inherited from eight previous rounds in the previous five decades and made it more development friendly…reducing American subsidies on cotton, because they are unfair to African producers.
As we speak, the EU high tariffs or the increasing import quotas…these barriers are somehow more flexible. (There is also the) reducing of Japanese restrictions on rice imports. That is the regulatory aspect.
On the other hand, the fact that agriculture is a major issue reflects the power of African countries at the negotiating table. If the US, EU or Japan were still calling the shots as they used to, agriculture would not be the number one agenda. Agriculture is important because developing countries make it so.
Nevertheless, the Dar es Salaam conference is not about the negotiating table. The meeting is about the capacity to benefit from these changes of the rules.
These are two different tracks. There is no way that aid for trade can be a substitute for negotiations about the rules. We need better aid for trade which is better organized.
Q These are noble intentions. You are working hard to harmonise and motivate global trade operations and support developing countries. But don`t you think that corruption is a main hindrance to achieving your goals?
We know that part of the problem lies with African governments. Nonetheless, it is alleged that there is corruption in programmes run by international finance organizations. If this is the case, is there a hope for developing countries? Is corruption not a threat to all your efforts?
A: I agree with you that corruption is the cancer of the economy. It is a disease that distorts rational economic decisions. I know that because I was previously the French treasurer of Transparency International. However, as the WTO director general, I am in the business of negotiating rules.
We have no rules in the WTO about corruption, and as long as we don’t have that, I have to stay outside this perimeter. It is only the members of WTO, who can decide to open a field of international regulation on corruption.
Q: The question of realpolitik and conflicting national interests exist among members of the WTO and cannot be ruled out in global trade, which is presumed to be free. Given this scenario, what is the role of the WTO as an impartial body?
For example, major economic powers are able to press for regime change in Africa by making the economies of the targeted countries scream. This is the mixture of trade and politics. So being the regulator, how do you separate the wheat from the chaff?
A: It is very simple. We have rules that govern international trade, and these are decided through multilateral negotiations between countries and consensus is reached. It is a system whereby the right of each country in negotiations is equal.
If a country believes that another country behaves unfairly, we have an adjudication system, panels and an appeals body that can adjudicate the dispute.
The losing party is obliged to enforce the determination as in the case of the existence of trade sanctions. Developing countries have litigated and won cases against the belligerents of the system.
Q: The Dar es Salaam conference is trying to come to the side of trade by helping African countries build more trade infrastructure.
However, Africa is still donor dependant as many countries get over 50 percent of foreign budget support.
Will the meeting emphasise the re-direction of the donations to capital inputs, technical assistance and transfer of vital skills, what the Chinese call giving the fishing net rather than the net?
A: That is the basic concept of aid for trade. Aid-for-Trade is not about redirecting existing development assistance to trade capacity building.
We are not sort of robbing Jack to pay Peter. There is a link between human resources, education, health system, infrastructure, agricultural production capacity, availability of energy. You can’t separate these in different boxes. Aid-for-Trade is about mobilizing more resources, which at the end of the day, come from Western tax-payers money.
This is the political reality we have to face. We have to build the case for that to happen. Aid-for-Trade has to be beefed up as already pledged by donors. There are already pledges made in Hong Kong that Aid-for-Trade should be doubled.
Our business is to see that this works and aid goes where the mouths are. This has not always been easy. We have to make sure that the necessary coordination is there, so that we can measure the efficiency of this money.
We the trade people are fairly pragmatic. We have big theories and grand visions, but at the end of the day, the game is in the numbers.
Q: The issue of subsidies keeps cropping up in various WTO forums. What we are seeing is that African countries are being pressured not to subsidize their farmers, and they are toeing that line.
African farmers are getting very poor prices because crop buyers are conniving to manipulate the market. At the same time, the developed countries still provide subsidies to their farmers. Who is pushing this subsidy agenda and why?
A: The number one topic has been slashing down Western subsidies to agriculture, from the US to Japan, and the numbers which are already under the table are of the magnitude of reducing the previous ceilings we still have from the previous rounds to about 70 percent.
This is what we are discussing at this stage of negotiations. We are not there yet, but this is on the table. Our target is zeroing export subsidies. That is the concrete result that can happen to developing countries if the negotiations are concluded. It is not easy, of course.
The US Congress is not that happy about cutting subsidies to US farmers. The EU Council of Ministers is not that happy that the imports of poultry or pork will have to improve a lot. The Japanese are not that happy that the imports of rice will have to go there. That is the direction which we have been taking.
Q: Taking into account the agricultural production of a country like Tanzania, can it really significantly increase without farmers’ subsidies?
A: Kenya, Uganda and Tanzania have, as far as the WTO is concerned, flexibilities to subsidize their farming activities. We have what we call special preferential treatment, so the rules on subsidies are not stringent on developing countries compared with developed countries.
For developing countries, the issue is not so much the rules but the availability of the money. It is also true that countries in this region have a comparative advantage in areas like cut flowers or vegetables, which have growing demand in big rich markets like Europe, US and Japan.
There is a big potential there. In the coming 20 years, there will be one billion people on this planet who are not eating meat today but would be eating meat then because of the link between development and the mix of basic food.
Moving from cereals to poultry, poultry to fish, fish to beef. The resources of this region are enormous. The demand is on the right side.
When you look at the prices of many commodities today, they are obviously rocketing because of the imbalance between supply and demand, but not because there is not enough supply, not that there is no high demand, but adjusting supply to demand of what is available. So this comparative advantage, plus farming know how, plus low (production) cost, is a big opportunity.
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