Bridges Weekly Trade News Digest • Volume 9 • Number 1 • 19th January 2005
Millennium Project Calls For Balancing Trading System
The UN Millennium Project — an independent advisory project commissioned by UN Secretary-General Kofi Annan to propose the best strategies for meeting the Millennium Development Goals (MDGs) — in its final report reproached the global trading system for being "unbalanced against the interests of developing countries". Efforts to correct this should focus on improving both market access and supply-side competitiveness for low-income countries, the authors concluded, repeatedly emphasising the need for assisting poor countries in adjusting to the impacts of trade liberalisation.
Above all, the report, entitled "A Practical Plan to Achieve the Millennium Development Goals," calls for a significant increase in development aid to 0.54 percent of industrialised countries’ income by 2015, and argues that the often unfocused and inefficient international development system is in need of a major overhaul. The report sets out 10 key recommendations for "quick wins" and broader aims, including a call for greater market access, building supply-side capacities, regional cooperation on trade and environmental management, and strengthening UN agencies.
Trade: Improving market access, supply-side capacity
In the chapter dealing specifically with trade, the authors single out agriculture as the "biggest and costliest aberration of the trading system", urging rich countries to deliver substantial liberalisation under all three pillars of the agriculture negotiations (domestic support, export subsidies and market access). Developed countries should aim to remove all export subsidies and decouple all support to farmers by 2010, and to cap all domestic support measures at 5 percent by 2015, while addressing tariff peaks and tariff escalation. Additional complications for poor countries resulting from agricultural liberalisation, such as increased food import costs, should be dealt with by a significant increase in international aid, the authors recommend.
The need for "economically and socially sustainable adjustment costs" was also stressed with regard to tariff reductions for non-agricultural goods and in particular the phase-out of textiles and clothing quotas. In this context, the report calls for developed countries to bind all tariffs for non-agricultural goods at zero by 2015. While acknowledging the need for less than full reciprocity, the report also notes that binding tariffs in developing countries at uniform and moderate rates would be "in their own development interests".
Regarding trade in services, the authors point to liberalisation in mode 4 (temporary movement of people to supply services) as a "major source of gains for developing countries, capable of bringing more benefits to them than perhaps any other part of the Doha Agenda". Again, the need for managing adjustment is highlighted, requiring appropriate care to the nature, pace and sequencing of reform. While the authors suggest bilateral and plurilateral agreements as an interim step, "WTO commitments remain the best and most effective way to deliver gains to developing countries".
Moreover, the report stresses the importance of making special & differential treatment more effective and operational, including an incremental and temporary "aid for trade fund" or significantly increased contributions through existing channels "to support countries in addressing adjustment costs associated with the implementation of a Doha reform agenda.
Other issues taken up in the report include the need to reduce anti-dumping measures; assist poor countries in meeting OECD standards; replace preferences with equivalent development assistance; provide support for coping with the erosion of trade preferences; and assess the impact of intellectual property rules on developing countries.
In addition to recommendations related to the Doha Round negotiations, the report also stresses the equal — and often neglected — importance of promoting the export supply side in low-income countries, in particular primary commodity exporting countries which have tended to stagnate compared to exporters of manufactured goods. Related policies and investments should be a central element within countries’ MDG-based poverty reduction strategies.
Need for political will
Many observers, while welcoming the report, stressed the need for countries to muster the necessary political will to put the recommendations into practice. This year "must see substantial new investment to fund a war on poverty," said Jonathan Hepburn, policy coordinator of Oxfam’s MDGs campaign, pointing in particular to the US, Japan and Germany. "The tiny amounts currently given by rich countries are inexcusable and the poorest are paying with their lives," he added. For some groups, the recommendations of the report do not go far enough. "Unfortunately it is still trumpeting the development model of 25 years ago even though it has not worked," said Steve Tibbett, ActionAid UK head of policy and campaigns. Others have criticised the report’s emphasis on aid, pointing to bad governance as one of the key underlying causes of poverty.
Background
The MDGs are the world’s targets for dramatically reducing extreme poverty in its many dimensions by 2015 — income poverty, hunger, disease, exclusion, lack of infrastructure and shelter — while promoting gender equality, education, health, and environmental sustainability. The 3-year UN Millennium Project, which is directed by Professor Jeffrey D. Sachs, Special Advisor to the UN Secretary-General on the Millennium Development Goals, is an independent advisory body charged with proposing cost-effective measures for achieving the MDGs. The bulk of its analytical work has been carried out by 10 thematic task forces comprising more than 250 experts from around the world. The task force on trade was coordinated by Ernesto Zedillo, Director, Yale Center for the Study of Globalization, and Patrick Messerlin, Professor of Economics, Institut d’Etudes Politiques de Paris and Director of the Groupe d’Economie Mondiale.
The report is available at http://unmp.forumone.com/.
"Millennium goals," THE INDEPENDENT, 18 January 2005; " Whatever it takes," ECONOMIST, 18 January 2005; "Way exists to slash poverty, but is there the will?," IPS, 17 January 2005; "Rich must keep aid promises, says UN," GUARDIAN, 18 January 2005.