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Regional Trade

Summary, Overview & Development Report
The Case for Regional Trade: July 2001
By Emmanuel.K.Bensah, ICDA Secretariat

As globalisation is taking the world by storm, so are regional blocs proving to be panaceas to full integration into the world economy. In July's WTOIL, we covered a few of these blocs - EU; APEC; ECOWAS; MERCOSUR; COMESA; NAFTA - and found articles that gave some insight into their workings.

In July 19's WTOIL, the document from the University of Melbourne explained that there were different types of regional trade agreements (RTA): the PTA (Preferential Trade Agreement); Free Trade Agreements (FTA); Customs Unions and Economic Unions. Examples of regional blocs that correspond to the above category are listed below:

  • PTA: (non-reciprocal); trade barriers among members lowered. Papua New Guinea Australia Trade and Commercial Relations Agreement (PATCRA II), since 1977.
  • FTA: (reciprocal); trade barriers abolished; NAFTA, since 1994.
  • CUSTOMS UNION: all members adopt common external trade policy; MERCOSUR since 1995.
  • EU: further integration methods adopted to facilitate free movement of labour, capital and harmonization.
  • ECOWAS: all of the above, according to J.A.Aremu, who argues that « the theoretical framework for economic integration of the mandate implies a free trade area, a customs union, a common market and an economic union. »
  • As the document goes on to argue, RTAs "may not always be beneficial to the global economy, but they are both beneficial and logical in a domestic sense."

    Who's afraid of the FTA...?
    The title of an article on the "" Website perhaps said it all by begging to differ - "Have we rushed into the FTA?" it wondered. Though the article dates from January when the FTA was launched in Lusaka, with over 160 companies from COMESA and the EU witnessing the occasion, this did not prevent the questions. One came especially from the Zambian manufacturing sector, which argued that its sector would need (further) strengthening before it joined the grouping of COMESA.

    A Zambian economist echoed his ambivalence when he stated that "if regionalism is a chain around our necks, let's not have it." Though he argued that Latin America best exemplifies (successful) regional blocs, he argued that "for smooth regionalism to take place, there was need for a membership criteria and clear leadership."

    ...Certainly not the USA!

    In July's WTOIL, we also took a brief look at NAFTA, and Mexico. In the first article - of July 12 - the article lent support to the idea that Mexico was coping very well, thankyou, on its own, given the very different circumstances in which it became aligned with the more prosperous and powerful countries of Canada and the U.S. In a later WTOIL, specifically that of July 26, another article indicated that Mexico was suffering the consequences of being part of NAFTA.

    More precisely, the three-group regional bloc is making Mexican peasants landless; and creating more poorly paid jobs in maquiladoras (situated along the US-Mexican border). This prompted a brief speculation on how harmonization is paramount in regional trade. Looking at examples of how the Economic Community of West African States' (ECOWAS) dream has fared, notwithstanding criticism of NAFTA's impact on Mexico, it was not difficult to draw the conclusion that harmonization is fundamental. If not within NAFTA, more crucially within ECOWAS, the 16-member grouping established since 1975.

    One of the reasons why harmonization is paramount for mutually beneficial trade is because conflict has often mired the members of this grouping. One need look no further than Sierra Leone, and Liberia - members of ECOWAS - to see how problematic it is for such a regional organization with lofty ideas to move forward if two of its members are embroiled in conflict. Though harmonization is crucial, even more important should be what Aremu calls "potential incidence of that trade" being substantial. In other words, despite independence, many of the West African countries continue to maintain more links and trading relations with former colonial powers in Europe than with other closer West African countries. This is not to suggest a policy of insularity on part of ECOWAS members, but it does beg the question that perhaps it is time intra-community trade - not only within the West African sub-regional organization of ECOWAS, but within other African regional blocs - was increased exponentially.

    Here come the Big Four, plus Two
    This, however, is not the situation in Latin America. Mercosur, credited as the "fourth largest trade bloc in the world in order of economic importance", is shoring up its strength in order to counter-balance the potentially adverse ramifications of the FTAA - scheduled for 2005 -- on its economies.

    Mercosur groups Argentina, Brazil Paraguay and Uruguay as members, and Chile and Bolivia as associates. According to "Nafta on Steroids", featured in the WTOIL of 26 July, it is foreseen that members "will have shared tariffs, coordinated taxes and a common currency." Collectively, the population of this grouping runs to a vertiginous 225 million people, with a combined GDP of an estimated $1.2 trillion.

    The article suggests that Mercosur could potentially stymie, among other things, the deregulation by NAFTA that has "emasculated the authority of national governments." Moreover, the inclusion of Brazil is important as it is pushing to transform Mercosur into a powerful market "capable of sparring with its formidable Northern neighbour - NAFTA".

    In EUROPE, the EU is keen to move forward with further trade liberalization, as exemplified by EU Trade Commissioner Pascal Lamy entertaining trade negotiations with MERCOSUR.

    UK Chancellor of the Exchequer/Finance Minister is pushing prudence aside this time and going full swing with the idea of an Atlantic Free Trade Zone. Whether it pulls off better than his "prudent" economic policy that has seen in more privatization than ever witnessed under a Labour government, is a moot point.

    In AFRICA, ECOWAS is also keen on negotiating with MERCOSUR officials. The South-South collaboration could quite possibly upset both EU and US officials.

    ECOWAS' recent Trade Liberalization Scheme will benefit traders of palm oil; milk; sauces; scouring powder; plastics, and clothing materials. A total of 167 new products will be exempted, subject to approval by the ECOWAS' executive arm, the Council of Ministers. The objective of this measure is to boost intra-community trade.

    In LATIN AMERICA, Venezuela President Hugo Chavez makes the daily "Independent" paper's international section when the paper makes reference to the Head of State's welcoming of his Mexican and Colombian counterparts in April. Actually, Chavez is on a mission to resuscitate a moribund trade bloc called the Group of Three, and hopes that the bringing together of the corporate-friendly Vicente Fox, and Andrès Pastranos can form a potential power in the region.

    Though the paper argues that the summit is an opportunity for the president to "trumpet his vision of a unified Latin America", his motivation stems from a greater desire to strengthen Latin American trade blocs before the creation of the Free Trade Area of the Americas. It is estimated that the FTAA would "create a single $1.3 trillion dollar market from Alaska to Argentina".



    United Nations LDC3

    Summary, Overview & Development Report
    The Case for United Nations LDC3: July 2001
    By Emmanuel.K.Bensah, ICDA Secretariat

    Sins of the Father

    It is not implausible to think that Africans are probably being punished for some evil deed one of their own committed several centuries ago. Considering the sobering statistics that filled the pages of last month's Impact List, no one could probably be blamed if they arrived at such a conclusion. Nothing can explain why to this day, there are 49 countries - crudely classified as LDCs - that effectively face the prospect of marginalization unless they hang on to the across-the-board-liberalisation dogma that neo-liberals like to promulgate.

    In any event, July's WTOIL made considerable reference to the plight of the poor, despite the overshadowing of Genoa violence over a Zanzibar conference on LDCs (to prepare themselves for upcoming WTOMC). Their plight is a very fundamental one - obtaining their daily bread, as well as ensuring that the food they eat does not become an economic burden, but a right as fundamental as is one's personal security.

    In July 9's WTOIL, two West African countries - Ghana and Nigeria - were in the spotlight. We read how despite high rising prices in Ghana -brought about by the ineptitude of the previous government - a retired Minister of Food and Agriculture is seeing to the dire food situation. He will be opening a six-month course to further investigate the systemic causes of food insecurity.

    In Nigeria, too, a government official highlights how for Nigeria - biggest financial contributor to ECOWAS - to grow industrially, she needs to pay particular attention to developing her food industry.

    A possible solution could come from two unlikely bedfellows - the regional group of 16 countries, ECOWAS, and the UN's own Food and Agriculture Organization (FAO). In fact, ECOWAS Executive Secretary, Lansuna Kouyate, emphasised that agriculture is paramount for West Africa's development "as 70% of the sub-regions' population resides in the agricultural sector." In what was the third meeting between the two organisations, it was agreed that both "will work towards harmonising legislation and regulations, co-ordinate and integrated institutions dealing with agricultural matters." It eventuated that a regional/continental approach will bring about quick results - and one of these could be a Common Agricultural Policy exclusively for West Africa.

    According to the article in 23 July's WTOIL - "Agricultural Exports of Developed Countries" -- agriculture is the cornerstone of not only many a developing country's economy, but also LDCs.

    Compared to the industrialised countries' - especially the EU and its CAP (not excluding the US and its subsidising of farmers) - whose many agricultural subsidies, the article continues, "undermine the competitiveness of developing country products", the LDCs are lagging way behind. The statistic is staggering -- the subsidies of these economies yield nearly $1billion a day. On an annual basis, these subsidies surpass the combined GDP of all 49 LDCs. According to "Empty Promises don't Feed Poor Children", (July 9 WTOIL), both the EU and the US spend more on agricultural subsidies today than they were spending at the start of the Uruguay Round of world talks in 1986.

    Paying Lip Service...

    Once could be forgiven for thinking that this in itself would be enough to generate some concern for First World officials that something needs to be done. How far this issue has been mooted is questionable. According to "Trade-related Technical Assistance to LDCs" - featured in July 9's WTOIL - as far back as October 1997, a high-level meeting on Integrated Initiatives for LDCs Trade Development took place. The meeting supported proposals for "increased technical assistance efforts by the WTO itself, autonomous action by WTO members to improve market access for imports from the LDCs and the establishment by six international organisations of an Integrated Framework for their trade-related technical assistance to LDCs."

    Proposed in 1997, there were high hopes for a constructive outcome. The framework was intended to co-ordinate the activities of WTO, UNCTAD, UNDP, ITC, World Bank, and IMF. The agencies actually agreed to co-ordinate assistance to LDCs for trade-related activities. Yet, when it came to the crunch, the agencies themselves had no funds allocated for the Integrated Framework. Put simply, the initiative was made abortive by lack of organisation and political will. Those organisations that had pledged funding no longer showed interest in helping push the project forward. Consequently, there has been no significant funding, which the authors of the article consider "all deeply disappointing", as it brings home "how trade-related proposals fail so miserably do fit into broader development plans."

    ...And Selling an Empty Box

    WTO Officials like Philippe Legrain, until recently special adviser to Mike Moore, would have us believe that developing countries "are attracting investment not by lowering their standards, but because they are making the best of their comparative advantage"(WTOIL of 16 July). This basic tenet of economics in this context remains as specious as the arguments peddled by WTO-philes that "if you hate capitalism, you will probably never support the WTO."

    To use the statistics that GDP per person fell by 1% a year in the '90s in non-globalising developing countries, while it rose by 5% a year in globalising ones, is making a mockery of those who argue otherwise -- such as Green Left Weekly. They argued that HDR 2000 statistics are nothing but a litany of lies. According to this article, one set of World Bank data indicates that the ratio of incomes of 20% of the world's population living in the richest countries to those of the 20% in the poorest was 13:1 in 1960; 18:1 in 1991, but fell to 16:1 in 1997.

    Green Left Weekly argues this is biased data, for it includes rapidly industrialising China, with its 1.2 billion people. But an even more sobering statistic hits us in this WTOIL: average per capita GDP of an OECD country was 16 times greater than that of the average LDC in 1985, and 19 times greater in 1998.

    Pandora Revisited

    Perhaps the most glaring indictment of the UN's HDR comes from two articles - in 16 July and 23 July's WTOIL. The first, by New Delhi-based food and trade policy analyst Dr.Devinder Sharma, entitled "Biotechnology Will Bypass the Hungry", argues that UNDP's annual Human Development Report 2001, "Making New Technologies Work for Human Development", remains "another biotechnology industry-sponsored study" that sings the praises of market-led technology at the expense of the poor - "all in the name of eradicating hunger and poverty." He maintains that "the reality of hunger and malnutrition is too harsh to be even properly understood." His argument is that biotechnology, far from assisting the poor, will further entrap them.

    Sharmas' criticism is incisive. He writes: "the deft manipulation of the prestigious UNDP's HDR to push forth the US farm interests, however, will cast a shadow over the credibility of future UN programmes for human development.

    Faiza Rady, writing in the second article, echoes a similar sentiment when she writes of how ever since the UN formed alliances with corporations, which partially finance the international organisations' operations, it has been forced by dint of this association to sing their praises. Ultimately, this chorus of approval for biotechnology remains unequivocally corporate-led, with a mere UN mask. The UN, it appears, feels it has no choice. In what many see as a volte-face by the usually Southern-friendly and apolitical - and indeed a-corporate (as suggested by my colleague Julio) - United Nations, the HDR is, put simply, seeking "highly controversial solutions" - as exemplified by its promotion of Genetically Modified Organisms - to the very complex problems of food security and hunger in the South. That the UN is now toeing the transnational line is a moot point. If the UN of all organisations has succumbed to the charms - whether by dint of pragmatism or expediency - and strength of private finance, who is to stop these multinationals leaving indefinitely the box that Pandora never closed?


    © E.K.Bensah, 2001



    Summary, Overview & Development Report
    The Case for Qatar/WTO: July 2001
    By Hannes Huhtaniemi, ICDA Secretariat

    July was the month in which the WTO Impact List began its daily focus on five diverse, but highly crosscutting, issue areas. Today we bring you the synopsis of what appeared in July's Qatar Impact Lists.

    Large emphasis lay on the prospects of launching a new round of trade liberalization talks at Doha. The quotes below highlight some of the most recurring concerns brought up.

    "The new round of WTO talks, then, should not be regarded as a fight over more rights and privileges but, if it is to be successful, should endeavour to formulate a uniform criteria for all, as well as awarding much needed relative advantages to developing countries. Only then will the historic imbalance debilitating the position of the developing countries begin to be redressed." (From WTOIL 18 July - WTO PROSPECTS
    Date: 5 - 11 July 2001
    By: Aziza Sami // Al-Ahram Weekly Online )

    « EU negotiators favour some level of concessions to Third World governments to get them on side. They are also far keener to get the round off the ground, as the EU needs gains on new issues, such as investment and competition, to offset what it will likely have to give away in the ongoing negotiations on agriculture, which the EU massively protected under its Common Agricultural Policy. (…) Southern governments have been able to force discussions on implementation issues within the WTO, but Quad negotiators have brushed their concerns aside and have conceded nothing substantial to date. (…) The negotiating position of the "like-minded nations" group, which includes major Third World trading nations such as Brazil, Egypt and India, is to threaten to oppose a new comprehensive round outright unless they receive tangible concessions on implementation issues before the Qatar conference and unless issues of interest to them, such as anti-dumping policies and export subsidies, are part of the round. Many Southern governments are also dead-set against adding new issues like investment to the agenda.

    The US for its part has said that it will not, under any circumstances, submit its export subsidy or anti-dumping policies, by means of which it massively aids both its exporting and import competing companies, to negotiation. »

    Date: April 25, 2001 issue --
    By: Sean Healy)

    The logic of the "trade game" - the secretive wheeling and dealing that goes on in the Green Room and which makes a mockery of the principle of decision making by consensus - was put bluntly by WTO Director General Mike Moore in WTOIL July 4.

    "It is through a round that developing countries can obtain the leverage that is necessary to engage effectively with the more powerful nations. Only a broad round offers the sort of trade-offs that are necessary to bring about an outcome where all member nations win," (MOORE LENDS WEIGHT TO DEVELOPING COUNTRIES
    Date: June 15, 2001
    By: Zimbabwe Independent (Harare); Dumisani Ndlela in Geneva)

    Now, questioning such lofty statements as "where all member nations win" is what we like to do best. "Engaging effectively" with developed nations in this horse-trading is a tall order for poor states, which have had a dangerous deficit of trade negotiating cunning and expertise ever since they were formally included in the process in the Uruguay Round. So-called "consensus" decisions in effect mask an ugly tradition of pressure build-up and arm-twisting of developing countries.

    All the same, we had run something on the previous day's WTOIL from the "pro-round, pro-WTO" camp, which highlighted features of the global economic context in which the Qatar-round is being hastened off the ground, as well as some improvements the WTO can claim on other Bretton Woods offspring institutions. The author clearly understood the necessity of approaching the prospect of a new round with modest proposals (and hence with fewer opportunities for manoeuvring away the developing countries' trading futures), and the need for a conciliatory tone in trade talks to bring the multilateral system to the service of those who need it most.

    "Does (the fact that agreement on the substance of Doha is lacking) matter? After all, world trade seems to be bowling along nicely without the negotiators. Last year's phenomenal growth in merchandise trade ­ over 12 per cent, in dollar terms ­ matches anything we have seen in the past 50 years. It was, admittedly, boosted by the rising price of oil, driving Middle Eastern exports up in value by over 50 per cent. But even in volume terms, trade grew spectacularly: the rising price of oil went hand in hand with a fall in the price of manufactured goods ­ for the fifth year in succession. Other regions enjoyed a trade bonanza. Only in Western Europe were both growth and trade sluggish. So who needs another trade round?

    Well: one group of countries clearly does. Of all the complaints at Seattle, the most rational came from the developing world, which believes the trade playing-field is still stacked against it. Turning against the WTO was, however, an irrational response, since this fragile institution is the only weapon small economies have.

    The difficulty is that the "trade game" involves cross-industry bargaining, with each country discarding some restrictions in return for market access elsewhere. This has been vividly illustrated in the trade regime's greatest success story over the past year, the negotiations with China. While the rich world's protesters berate the WTO as a lackey of the "new colonialism", the Chinese government remains keen to join. Last week's negotiations with the United States had truly remarkable results, not least an agreement to reduce China's agricultural tariffs to single figures. In the previous phase of these negotiations, the European Union did even better than the United States; they now also have to close the deal, but if they can, the path to China's entry looks clear.

    For the future of international trade, this would be far more important than anything else that is likely to be agreed at Geneva or Doha. In the struggle to set a new agenda, the WTO will be wise not to be too ambitious. Yet some sense of momentum is important, lest commitment simply drains away.

    For all the criticism, the WTO has some claim to be the most functional (or least dysfunctional) of all international economic organisations. It is the youngest. It is the leanest. It can only change by consensus. It cannot invent theories of development, embark on large-scale lending or tell governments what to do with their currencies and interest rates. It can only arbitrate between members on the basis of rules that they themselves have written. It is the least dominated by the United States: neither the International Monetary Fund nor the World Bank has any sway over their host country, but WTO panels have found against the US more than once. Mr Moore may be pushing it a bit to describe the WTO the "final nail in the coffin of imperial and domestic privilege", but he is right to remind us of its essential neutrality.

    The WTO has been set up for a bruising year of exhortation and negotiation with a grumpy membership, without strong leadership from the major economies and against a background of popular discontent. At the end of the day, let's hope the world remembers to keep tight hold of Nurse. There is something worse."

    Date: 18 June 2001
    By: Sarah Hogg, Chairman of Frontier Economics) [END]

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