How can trade be harnessed as a development policy instrument in the post-2015 development agenda? What role can the WTO play to this end?

Continued and sustained economic growth has been one of the main forces in reducing poverty in the world’s developing and least-developed countries since the launch of the MDGs. Several large emerging economies as well as many low-income countries have harnessed the economic growth they have achieved through increased trade and more foreign investment, to address the problems faced by the poorest segments of their populations. They have also used financial resources generated by economic growth to invest in other critical social concerns, such as those related to health, sanitation and drinking water, rural livelihoods, education and governance.

MDG-8 (develop a global partnership for development) is an important element in the overall gamut of the MDGs. MDG-8 recognises that the ability of developing countries to reach sustainable levels of growth often depends on the international environment in which they operate. This is equally true for the multilateral trading system and WTO’s contribution in building a more predictable, inclusive and transparent multilateral trading system can be crucial in building a more favourable global environment for developing countries.

A lot of the gains of global trade, and their contribution to economic growth and consequently to the MDGs would have been nullified if trade between countries had been affected by the global economic crisis of the last decade. Since 2000 until 2008, world trade grew year-on-year at an average rate of 6 percent. While a sharp decline was evidenced in 2008 right after the crisis, by 2011 world trade values were already higher than those recorded before the crisis. Most of this increase in world trade was due to the fact that the trading system was kept open and that protectionist measures were kept in check. Nevertheless, it must be acknowledged that the stock of current trade restrictions and distortions continues to accumulate, and should be tackled.

Additionally, new forms of protectionism through a proliferation of non-tariff barriers – including subsidies – also cause great prejudice to trade from developing countries, particularly in agricultural trade. This is worrying since the small vulnerable economies, the LDCs, and even the emerging economies have a concentration of poverty in their rural areas. Addressing these latest threats to the multilateral trading system will necessitate, first and foremost, delivering on the promise made in Doha. 

Completion of the Doha round for a global development partnership

The Doha Development Agenda and more generally the rule-making function of the WTO are issues that are intimately tied to achieving the global partnership for development contemplated by MDG-8. Failure to conclude the Doha Development Agenda is partly responsible for the lack of achievement of certain targets in MDG-8. The blockages in the DDA are perceived by the outside world as an example that the trading system cannot respond to the structural changes in the world economy. The system has difficulty negotiating new rules because it is not malleable enough to adapt quickly to the geopolitical shifts and systemic challenges posed by the emergence of some developing countries.

The impasse in the Doha Round has led many countries to advance their own trade liberalisation programmes through plurilateral and regional agreements. These agreements, however, cannot be as inclusive or as encompassing as those which are done multilaterally and which include all countries in the system. Regional initiatives are positive and are to be welcomed but they can only be one part of the wider picture. The multilateral trading system has always co-existed with, and benefitted from, other trade opening initiatives. They are not mutually exclusive alternatives. It is important to think how the two processes – global and regional – can move forward together to reduce costs effectively and to curb protectionism.

A conclusion of the Doha Round would represent a step forward for the global partnership on development, enhancing coherence among trade, financial and environmental issues and strengthening the effectiveness of an open, rules-based Multilateral Trading System in addressing specific development challenges.

Initiatives to achieve specific targets of MDG-8

The targets identified under MDG 8 show that the international community recognises trade as an important engine for development. For trade to deliver real economic growth effectively, it needs to be “open, rule-based, predictable and non-discriminatory”, as recognised in Target A. This corresponds to the WTO’s core business of regulating international trade, reducing market barriers and ensuring a level playing field for all its members. In this regards in addition to the wider efforts to complete the DDA some specific results were achieved at the WTOs Bali Ministerial Conference in December 2013. Initially the Bali package had the effect of restoring the credibility of multilateral institutions, unfortunately the recent failure to adopt a protocol amending the WTO agreements, initiating the process of ratification and implementation of the Trade Facilitation Agreement has again cast doubt on multilateralism, eroding government’s trust in their commitment to the WTO. Renewed faith and trust among countries will be very much needed to complete multilateral processes necessary in the strengthening of the global partnership for development, setting the course for a sustainable and inclusive post-2015 development agenda.

In terms of concrete outcomes, Bali provided deliverables in three key areas: trade facilitation, agriculture and development, it also set in motion a process whereby members will decide by the end of the year on a clear road map for concluding the Doha Development Agenda. One major result from Bali is the Trade Facilitation Agreement, the first multilateral agreement concluded in the WTO since its creation in 1995. This agreement which will cut trade transaction costs and if properly implemented can increase trade competitiveness in developing countries.

Decisions in the area of agriculture responded to demands by the developing countries on issues of food security, tariff rate quota administration and export competition. On development, members agreed to put in place a monitoring mechanism for special and differential treatment provisions.

With regards to Target B – addressing the special needs of the least developed countries – several initiatives saw significant advance at the Bali Ministerial Conference. Three decisions specific to LDCs Duty-Free and Quota-Free (DFQF) market access, preferential rules of origin and operationalisation of the services waiver) were taken, with a fourth decision on cotton also of particular importance to LDCs. These decisions call for: full implementation of DFQF market access for LDCs; the simplification of preferential rules of origin benefitting LDCs; the operationalisation of the services waiver for LDCs and a reaffirmation of the Doha mandate on cotton (with respect to both its trade and development components).

With regards to Target C – addressing the special needs of landlocked developing countries and small island developing states – the Bali Ministerial Conference resulted in specific achievements for these groups of countries. Concerning the LLDCs the conclusion of a Trade Facilitation Agreement has the potential to address many of the fundamental transit policy issues that affect LLDC exports. LLDCs depend on their neighbours to have efficient procedures for clearing transit goods. The Trade Facilitation Agreement will create a common platform which all WTO members are expected to implement, for respecting the principles of transparency, consistency and predictability which will help traders in LLDCs and are the necessary ingredients for making trade flow in and out these countries. One of the decisions in Bali also reaffirmed the importance of the WTO’s Work Programme on Small Economies which covers all of the countries that are included in the SIDS category of the UN. This Work Programme calls for framing responses to the trade-related issues identified in improving the Small Economies participation in the multilateral trading system.

In line with Target E – providing access to affordable medicines in developing countries – WTO members have agreed an amendment to WTO rules that gives developing countries greater access to essential drugs, thus contributing to wider national and international action to address public health problems.

Target F – making available the benefits of new technologies – is also partially addressed by WTO’s work in its Working Group on Trade and transfer of Technology. By identifying technology and innovation as critical drivers of economic growth, the work in the WTO has shown that that technology innovation and its transfer can be critical in facilitating the achievement of the MDGs. Work on transfer of technology and eCommerce were also reaffirmed in decisions taken at the Bali Ministerial Conference.

What role for Aid for Trade?

One area that is seen as a successful example of the global partnership for development at work, especially for tackling supply-side constraints, is the Aid for Trade initiative led by WTO. In order to continue to provide benefits to developing countries, this initiative and the Enhanced Integrated Framework for LDCs must be strengthened and improved. Some of the ways in which this can be achieved came to fore at the Fourth Global Review which had the theme of “Connecting to Value Chains”. As part of the findings that emerged from this global review, the main factors identified as hindering suppliers from developing countries from entering or moving up value chains were: administrative hurdles related to customs paperwork or delays, bottlenecks in the area of transportation and shipping and various transport-related issues such as costs and delays, informal or corrupt practices and the lack of regulatory transparency. These issues are prime targets for a Trade Facilitation solution, which highlights the importance of having achieved a Trade Facilitation Agreement in Bali. This is also the reason why the theme for the 2014-2015 Aid for Trade Work Programme is “reducing trade costs for inclusive sustainable growth”, linking with the two main streams of work in the trade and development communities, trade facilitation and the sustainable development goals.

The Aid for Trade initiative has been a success but is not the only element driving investment in productive capacities and infrastructure. Donors and South-South partners have cited foreign direct investment as the key source of financing to meet the trade-related capacity building needs. Aid for Trade is increasingly being used to leverage private sector funds. Foreign direct investment was higher than Aid for Trade flows for over 20 LDCs in 2011. The role of the private sector as a catalyst for Aid for Trade is likely to grow in the future and it is of key importance to ensuring future growth in developing countries.

Lessons learned and way forward in the post 2015 development agenda

The initiatives that have been deployed in the efforts to achieve the MDGs have provided valuable lessons that must be carried forward as attention turns to work on the Post-2015 Development Agenda and the Sustainable Development Goals. In a statement made at the General Council on 24 July 2014 the Director General of WTO highlighted the following:

“First, the role of trade in the post-2015 agenda process should not be reduced simply to trade liberalisation. Rather, trade should be recognised more broadly as a development policy instrument;

Second, the WTO and its rules governing global trade have proven their worth in the context of the MDGs, both as a building block for economic growth and as a buttress to trade protectionism, especially at the height of the crisis. In this regard, the WTO and its rules should be seen as a way of providing a similar enabling environment and necessary buffer for the post-2015 development agenda through to 2030;

Third, the Bali Package and the DDA work programme can support the delivery of the SDGs. For example in the area of financing work with donors on Trade Facilitation and in support of the Enhanced Integrated Framework for LDCs and Aid for Trade will feed into other areas of work on the post-2015 agenda – and, in turn, work on the post-2015 agenda will support these activities;

And fourth, the SDGs should promote policy coherence at the global level. Failure to place more emphasis on the role of trade as an enabler for achieving these broader goals would be a real set-back for global policy coherence.”

Raúl A. Torres is a Counsellor in the Development Division of the WTO.

This article is published in Bridges Africa, Volume 3 - Number 7, by the ICTSD.