AN ANALYSIS OF THE OUTCOMES OF THE NAMA NEGOTIATIONS AND IMPACT ON POVERTY REDUCTION IN SADC: Looking Beyond HONG KONG

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AN ANALYSIS OF THE OUTCOMES OF THE NAMA
NEGOTIATIONS AND IMPACT ON POVERTY REDUCTION IN
SADC Looking Beyond HONG KONG
economic justice network of FOCCISAFellowship of
Christian Councils in Southern Africa

• Prepared by Temwa R. Gondwe, Project Manger-Trade
• tgondwe_at_mejn.mw
• Malawi Economic Justice Network
• For SARPN EJN
• At Regional Strategy Meeting Hong Kong Trade
  Ministerial Conference Outcomes Implications for
  poverty reduction in SADC
• 6-7TH April, Gauteng.

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Presentation Outline

• Contextual Comments
• Introductory remarks
• Structure of SADC Economy
• NAMA negotiations in Hong Kong
• Looking beyond Hong Kong
• Conclusion

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Contextual Comments

• Forcing poor countries to liberalise through
  trade agreements is the wrong approach to
  achieving growth and poverty reduction in Africa,
  and elsewhere.
• Commission for Africa report, March 2005
• A monkey sets to scale up a
• greased poll. Each day it climbs three
• feet of the poll while it falls down two feet in
  the next
• day. How long will it take to climb up a
  sixty-foot high poll?
• Anonymous

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Introductory remarks

• When going to Hong Kong the objectives of the
  negotiations were to establish modalities for
  the reduction or, as appropriate, the elimination
  of tariffs, including the reduction or
  elimination of tariff peaks, high tariffs and
  tariff escalation, on non-agricultural products
  at the ministerial.
• Coming out of Hong Kong reduction of industrial
  tariffs in both developed and developing
  countries.

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Structure of SADC Economy

• Generally not changed for the past 30 years-
  Agriculture still dominantover 40 of GDP in
  most countries
• Poorly developed and deteriorating
  infrastructure roads, railways, ports,
  telecommunications, etc.
• Manufacturing decreasing low capacity
  utilisation, limited trained personnel, poor
  technology and plant design.

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SADC Structurecontd

• Structure of Production
• Similar range of products -foodstuffs, beverages,
  tobacco, textiles, clothing and footwear, which
  are agricultural-resource based.
• Manufactured goods - substantial proportions to
  total formal merchandise exports in South Africa,
  Mauritius and Zimbabwe

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NAMA Negotiations In Hong Kong

• A Quick Review
• Based primarily on proposals of developed
  countries
• Reduction of industrial tariffs in both developed
  and developing countries.
• LDCs kept away from mathematical wizardy of
  tariff rate cuts-text promised to provide
  duty-free and quota-free market access based on
  Annex-F.
• Concern for the LDCs of their product of export
  interest remained the same
• Developing countries fiercely opposed the
  developed countries-backed Swiss Formula

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NAMA Negotiations In Hong Kong

• Review Contd
• The negotiators left for Geneva to detail out the
  coefficients
• Deadline for modalities on NAMA was set on April
  30, 2006
• The text absolutely ignored the erosion of
  preferences.
• REMARK It is unambiguous that high co-efficient
  is needed to protect local industries, but given
  the current negotiation tactics employed by rich
  countries, it would be very difficult for many
  developing countries to negotiate in their
  interests.

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NAMA Negotiations In Hong Kong

• Impacts on Poverty Back to Square ONE
• NAMA talks heading towards a developmental
  disaster developed countries are having their
  way which is to force the developing countries
  to massively cut (or even altogether eliminate)
  industrial tariffs on a line-by-line basis in an
  irreversible manner. This is ruling out the
  future prospect of industrial development, and
  therefore economic development, in todays
  developing countries.
• Historical tried and tested methodologies and
  policy actions should be incorporated contrary
  to what many developed countries would have us
  believe, there is a respectable historical case
  for tariff protection for industries that are not
  yet profitable, especially in developing
  countries. By contrast, free trade works well
  only in the fantasy theoretical world of perfect
  markets.

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NAMA Negotiations In Hong Kong

• Impacts on Poverty Reductioncontd
• The historical and contemporary evidence shows
  that it is extremely difficult, if not totally
  impossible, for technologically backward
  countries to develop without trade protection (of
  which tariffs are the main element) and
  subsidies. The evidence shows trade
  liberalization works only when it happens
  gradually and selectively as part of a long-term
  industrial policy.
• Premature liberalization in sub-Saharan Africa
  has been devastating
• Economic growth in the continent was negative in
  per capita terms, while manufacturing employment
  collapsed. Eg.
• In Malawi, following trade liberalization
  starting in 1985, two-thirds of all manufacturing
  jobs were lost.
• In Uganda, domestic production was swamped by
  imports as manufacturing capacity utilization
  fell to just 22 per cent and although growth has
  returned in the last few years, the rate is
  extremely low and its sustainability is
  questionable.

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NAMA Negotiations In Hong Kong

• Impacts on Poverty Reductioncontd
• Principles that govern the NAMA negotiation (and
  the WTO as a whole) notably the level playing
  field - are profoundly flawed. Others, such as
  special and differential treatment,
  less-than-full reciprocity and flexibility, are
  interpreted in such a narrow way and twisted, as
  to rob them of their developmental content and
  undermine their practical value in the
  negotiations.
• All in all, there are strong theoretical and
  empirical arguments that show that the kind of
  tariff cuts proposed in the current NAMA
  negotiations are likely to damage the future of
  the developing countries. It may not be too much
  of an exaggeration to say that the developing
  country trade negotiators have to fight the
  developed countries NAMA proposals as if the
  future of their countries depended on it.

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Looking beyond Hong Kong

• Immediate Steps
• An Assessment of Effectiveness of Market Access
  given in Hong Kong export trends, tariff peaks
  and export destination.
• strengthen the political unity and technical
  cohesion in order to present a common view on the
  important issues. It may be useful to have the
  meetings at the level of Ministers
• Special efforts are needed to keep the group
  united and voice the position of group in unison.
  
• The capitals of the countries should widen the
  consultations on the WTO issues within their
  countries.

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Looking Beyond Hong Kong

• Need for Adequate and Continuous Preparation
• WTO meeting in Hong Kong beginning of new phase -
  need to mobilise resources for technical
  preparation in order to protect areas of interest
  and launch a concerted effort with coalition
  partners towards capturing the initiative from
  the very beginning of the new phase.
• Within the milieu of trade policymaking process,
  such preparations have to be embodied at least in
  five focal areas in acoordinated fashion the
  Ministry of Commerce, Permanent Mission in
  Geneva, Chambers of Commerce and Industries, the
  institutions involved in policy research and
  analysis, and the concerned civil society
  organisations.

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Looking beyond Hong Kong

• Research Based Advocacy
• The purpose of policy-research is not to provide
  governments with ready-made negotiating briefs
  but to provide information to officials about the
  trade-offs they face the likely costs and
  benefits of different options, technical
  solutions to practical problems, insight into the
  various linkages that exist in an issue area,
  etc.
• Main objective of studies will be to analyse the
  impact of various proposals so far submitted by
  the WTO members and to prepare inputs for
  developing strategy with a view to pursuing the
  interests of SADC as well as least developed
  countries in on-going WTO negotiations in the
  post Hong Kong phase.

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Looking beyond Hong Kong

• Some pro-defensive/Offensive strategies
• Building issue based-coalitions
• Rolling the Log
• Cross cutting Accommodation
• Bridging solution

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Conclusion

• As this war on futures rages on, it will be
  imperative that the developing countries agree on
  their defensive and offensive strategies. Faizel
  Ismail, the head of the South African Delegation
  to the World Trade Orgnization, Permanent Mission
  of South Africa to Geneva, asks the following
  questions What do you consider to be the main
  obstacles to the successful conclusion of the
  Doha Round? How would you suggest these obstacles
  could be overcome and result in a successful
  conclusion of the Doha Round by the end of 2006?
  What role can South Africa and Africa play in
  this?
• Role for Civil Society to give alternativesNOW