Global Policy Forum

By Jonathan Katzenellenbogen

What the New Partnership for Africa's Development (Nepad) wants above all from industrial countries is improved market access, in addition to more aid. But given a choice between more aid and trade, it is trade that stands the best chance of improving African incomes.

This weekend, African finance, development and planning ministers will, in their talks in Sandton on the implementation of Nepad, try to give impetus to their campaign for greater market access in the Doha round of world trade talks. There is little doubt about the substantial potential benefits from trade.

The World Trade Organisation (WTO) has calculated that the abolition of agricultural subsidies by Organisation for Economic Co-operation and Development (OECD) countries will give developing countries three times what they receive in development assistance. The United Nations Economic Commission for Africa says gains from eliminating trade barriers between developing and industrial countries could be the equivalent of more than twice Africa's gross domestic product. And the commission also estimates that the economic growth generated from lower protection could reduce poverty levels 13% by 2015.

In view of the labour intensive nature of manufacturing and agricultural activity in developing countries, greater market access holds hope for anti-poverty strategies. African countries should not only be focusing on the barriers to market access that they face in the industrial world. According to the United Nations Food and Agricultural Organisation (FAO), only 31% of African farm exports go to other developing countries and there is significant potential to boost this figure if market access is improved. The FAO says tariffs are generally substantially higher in developing countries than in developed countries.

But will the Doha round of trade talks deliver these benefits? After much rancour between the European Union and the US at the recent UN World Summit on Sustainable Development over the text on trade, there are definite signs of progress. The US has given a commitment to reduce all agricultural subsidies and the EU has spoken of the need to move away from its present agricultural policy towards a system that gives other forms of support to rural incomes.

A reason the EU is likely to abolish its current form of subsidies is that the accession of new member countries from east and central Europe would place a considerable fiscal burden on the richer members. But at this early stage in the Doha talks, which have to be concluded by January 2005, progress is far from assured. There are also commitments to liberalise trade in services, cut the peaks in tariffs, which hurt industrial exports, and reduce nontariff barriers.

One hope of progress in the Doha round of talks is simply that industrial countries are under increasing pressure to show that there are definite gains from globalisation. As the expansion of exports under the US's Africa Growth and Opportunity Act has demonstrated, greater market access can be a rapid way of bringing about these gains.

Nepad could provide a useful lever for African countries to ensure that many of the commitments made in Doha actually happen. But maintaining the impetus could be difficult. The US rise in farm subsidies this year created some doubt that the agenda was not on track and it still has to be seen whether the US does reduce subsidies.

The commission's chief economist Patrick Asea, says African countries should actively lobby in Europe and the US for market access. As trade liberalisation offers substantial benefits to consumers, he says, African governments wanting to increase access for subsidised commodities such as sugar or cotton, should join forces with consumer associations. African countries could also stress the urgency of their need for market access, says a background report prepared by the commission for ministers attending the meeting in Sandton this weekend.

The report says a good case can be made for OECD countries to grant expanded market access for the poorest countries ahead of negotiations. It would like to see concrete action to improve on existing initiatives such as the African Growth and Opportunity Act and the EU's everything-butarms initiative for greater market access. Apart from commitments to eliminate export rules and market distortions that impede trade, the report would like to see greater technical assistance for African countries to deal with trade issues.

Once granted expanded access, African countries will have to ensure they make the most of the opportunities. For this to happen the commission's report says there has to be an improvement in the investment climate including macroeconomic stability and sound governance. Poor countries will also have to be sure to integrate trade into development and poverty reduction strategies, the report says.

At the Sandton meeting, ministers will also be trying to come to grips with emerging forms of protectionism that promise to introduce new complexities into trade talks. One of the issues ministers will discuss is how the autonomy of African countries can be preserved, while respecting the legitimate objectives of importers to maintain high labour, social and environmental standards. There is talk in Europe of how developing countries might be assisted to meet emerging regulations.

Nevertheless, there is little doubt that these will constitute the emerging battle ground of trade.

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