September 2, 2009
Time to Deliver on Duty-Free, Quota-Free Market Access for the World’s Poorest Countries
By Randall Soderquist
This blog entry also appeared on the Huffington Post.
Leaders of the world’s richest nations have repeatedly pledged to offer the world’s poorest countries duty-free, quota-free (DFQF) access to their markets. Such access is one of the most powerful tools that high-income countries have to help poor countries to help themselves. The upcoming G-20 summit in Pittsburgh is an opportunity for the world’s leaders to finally deliver on this promise.
The promise is couched in diplomatic language but is nonetheless clear. The G-20 leaders reaffirmed this pledge most recently when they met in London last April. Their communiqué stated that they recognized “the current (global economic) crisis has a disproportionate impact on the vulnerable in the poorest countries and our collective responsibility to mitigate the social impact of the crisis to minimise long-lasting damage to global potential.” To this end, the leaders reaffirmed their commitment to both the Millennium Development Goals and the Gleneagles commitments to Sub-Saharan Africa.
In referencing these documents, the G-20 leaders implicitly re-asserted the importance of preferential treatment as a mechanism for economic growth and poverty reduction. The Millennium Development Goals, for example, state that United Nations member states should “address the special needs of the least developed countries” and calls on all developed countries to adopt “a policy of duty- and quota-free access for essentially all exports from the least developed countries.”
The Gleneagles commitments went further, stating that developed countries “should improve the utilisation of our preference schemes by ensuring that rules (particularly rules of origin) are transparent and simple to follow and do not inadvertently preclude eligible developing countries from taking advantage of those schemes.” In short, a tangible link was created by the leaders of the G-20 in London between what was promised in the past and what should be done in the future.
So where are we on the question of duty-free, quota-free access and “transparent and simple” rules for trade preference programs? Unfortunately, not as far as we should be, especially in the United States. Although high-income countries (and others) reaffirmed their commitment to DFQF access at the WTO Ministerial meeting in Hong Kong, U.S. insistence that market access be limited to 97 percent of products considerably diluted the impact, because the excluded 3 percent of products includes things like clothing and agricultural products – the very things that poor countries can competitively produce. And the United States is not the only country to create barriers to the poorest countries’ exports. Japan and South Korea also have product exclusions that undermine their trade preference programs. And while the EU offers 100% DFQF access under its Everything But Arms (EBA) preference scheme, its rules of origin provisions make it hard for poor countries to take advantage of this opening.
What is to be done? The Center has established a Global Trade Preference Reform Working Group – 20 prominent trade and development experts with a wide variety of backgrounds – to address the hard questions on trade preference programs. The group, which Kim Elliott and I co-chair, will offer practical policy recommendations on issues related to reform, coordination, and utilization before the end of the year.
But members of the Working Group have decided that there is simply no longer any reason to delay on a recommendation of 100% DFQF market access with easy-to-follow and generous rules. Members of the group have written an open letter to the G-20 leaders ahead of the Pittsburgh Summit on September 25 requesting that high-income countries implement these provisions by the end of the year. Significantly, the letter also calls on developing countries in a position to do so to gradually but consistently move toward this same goal. This is critical given the increasing relevance of South-South trade and the market pull of emerging economies like China, India, Brazil, and South Africa. The letter states in part:
We, the undersigned, call on the rich-country leaders meeting at the G-20 Summit in Pittsburgh to assist least-developed countries by providing 100 percent duty-free, quota free market access, with easy to use and generous rules, by the end of the year. Developing countries in a position to do so should agree to gradually but consistently move toward this same goal.
Evidence suggests that the global economic crisis continues to have severe impacts on least-developed countries. Sharp decreases in investment flows, export demand, export credits, and commodity prices have reduced export opportunities and pushed millions of men, women, and children back into poverty. Although this problem is their burden, it is not of their making, and the Leaders of the G-20 have a responsibility to implement policies that effectively address the concurrent issues of poverty reduction, economic growth, and political stability.
The letter has been sent to Prime Minister Gordon Brown, Chair of the G-20, and President Barack Obama, who is hosting the Summit in Pittsburgh, in anticipation of the final agenda-setting meetings in early September. With the Doha Round on life-support, and many of the LDCs sitting on an economic precipice, it is time for the leaders of the G-20 to follow up in a tangible way on their past commitments.
September 9, 2009 at 9:45 pm
For over 500 years, the now rich countries have impoverished the now “developing” countries by plundering resources, killing and enslaving people and despoiling their honor and culture.
It is unconscionable that organizations such as the World Bank charge countries interest for money they have stolen from them. It is economic rape.
We rich countries should be should be paying reparations for the riches we have taken — in short, economic truth and reconciliation.
September 9, 2009 at 9:55 pm
Gosh, Elizabeth. I don’t think the U.S. Congress is going to go for this. How about we start with duty-free, quota-free market access?
September 10, 2009 at 4:00 am
sorry, but this is too simple. everybody knows tariffs are only one side of the market access issue. you will realise that DFQF in most cases, including the EC’s “Everything But Arms” iniative, or the Swiss equivalent, are little more than pie-in-the-sky if you (a) look at the almost zero impact in terms of additional trade (http://www.nccr-trade.org/ip-5.1/market-access-in-switzerland-and-in-the-eu-for-agricultural-products-from-least-developed-countries-2.html) and (b) study the small print such as non-tariff barriers and other formal requirements, subsidies and safeguards – not to speak of private standards.
good ideas and wishes are not sufficient to change the world!
September 11, 2009 at 9:40 am
While I have a lot of sympathy for this call for the G20 to deliver on duty-free, quota-free market access for the World’s poorest countries, the previous blogger Christian Haberil has some strong points – zero tariffs in themselves wouldn’t in any case make much difference to the prospects for the low income in terms of exports – non-tariff barriers, standards, and rules of orign requirement make it very difficult for low income countries to sustain exports. You recognise this in your article, but I am not sure how realistic it is to expect a dismantling of all these ‘new tariff barriers’, especially at the context of a severe economic crisis. Your proposal would also (perversly) give a greater incentive for low income countries to continue specialising in agriculture, a sector in which tariffs in the industrialised countries are still generally high – tariffs on most industrial goods are now so low that the advantage of duty-free access is a very small one – and hardly enough to offset the huge competitive advantages of the so-called ‘Asian Drivers’. Finally, unless a proposal like this is made in conjunction with a call to dramatically reduce agricultural subsidisation in the industrialised countries, it is unlikely to make much difference to agricultural exports from the low income countries – tariff free access and a heavily subsidised agricultural are largely mutually incompatible policies. So, while I wish you luck with the proposal, I think the odds are stacked against it prospering.
September 14, 2009 at 8:43 am
Christian and Andrew, I cannot speak for the entire Working Group, but I can say for myself that it was the simplicity and timeliness of the proposal that was appealing for many of us. 100% DFQF access could be provided to the LDCs by all the G-20 countries unilaterally and immediately. There would be no necessity for lengthy and complex multilateral negotiations. It is difficult for one to deny that offering 100% DFQF market access for agricultural products from LDCs to, let’s say, the United States would not have a positive impact on LDC exports? Empirical analysis by Antoine Bouet and his colleagues at IPFRI suggests it would. (see, e.g. http://www.ifpri.org/sites/default/files/publications/in14.pdf)
Certainly one should not over-emphasize the potential economic benefits of such an approach. Subsidies continue to heavily tilt the playing field for LDCS, but we all understand these are not going away soon. Complex rules of origin – part of the “formal requirements” of which you speak – create substantial barriers for LDCs and limit the efficacy of preference programs. Utilization rates for preference programs continue to be very low, and your comments on non-tariff barriers (NTB) – sanitary and phyto-sanitary (SPS) standards come to mind right away – are on target. These are issues that the Working Group will address in the final report. So will the issue of supply-side constraints. Stay tuned on these.
The question as to whether the incentives included in preference programs ultimately lock LDCs into particular production patterns, limit diversification, and discourage movement into value-added industries was touched on in your comments. From my perspective this is one of the most important issues to be addressed as the global trade community contemplates the reform of trade preference programs. A partial yet critical answer lies in innovative approaches that promote policy coherence between trade and foreign assistance policies and allow LDCs to create effective and sustainable national development strategies. I wrote on this issue after I returned from my trip to the AGOA Forum in Kenya. (http://blogs.cgdev.org/globaldevelopment/2009/08/in-kenya-questions-and-suggestions-on-agoa.php). Some countries do this better than others, and there are lessons to be learned there.
Please do not be shy on any of these issues mentioned above. If you have ideas about how best to address them, shoot them in our direction.