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Diluting foreign investors’ protection makes no sense
The Department of Trade and Industry has had a veritable bee in its bonnet about the 46 bilateral investment treaties (BITs) that the Nelson Mandela and Thabo Mbeki administrations signed in the post-1994 decade of South Africa’s economic liberalisation.
This was to witness the opening up of an ossified apartheid-era economy through sweeping trade liberalisation, exemplified by the 1999 European Union (EU)-South Africa Trade, Development and Co-operation Agreement, under which 90% of EU-South Africa trade was freed under an asymmetric tariff phase-down arrangement, the partial privatisation of major state-owned entities (Telkom, South African Airways and the Airports Company South Africa) and, at the end of the Mbeki presidency, an ambitious, but still incomplete, programme to establish a Southern African Development Community (Sadc) common market, modelled on the EU, through the 2006 Sadc Protocol on Finance and Investment that came into force in 2010.
In its 2009 BIT review, the department castigated BITs as “unequal and exploitative investment agreements” that prevented developing countries from “fighting poverty”. Trade and Industry Minister Rob Davies went further in July 2012, describing South Africa’s investment treaties as potentially inimical to the government’s “transformation agenda”, while investor-state dispute settlements allegedly promoted “narrow commercial interests” through “unpredictable international arbitration”. Accordingly, all “first-generation” BITs would be terminated by the government, but possibly renegotiated on the basis of a new-model BIT, which would provide the state with the policy space to pursue “legitimate public policy objectives”.
The department has subsequently made good on its promise: the Belgium-Luxembourg BIT was terminated on its 10th anniversary last March, followed by that with Spain in June and, in October, those with the Netherlands, Germany and Switzerland, all EU members, other than Switzerland.
The terminated and existing BITs are now to be replaced by the Promotion and Protection of Investment Bill, which was published for three months of public comment on November 1. Although the bill’s objectives proclaim that South Africa is committed to an “open and transparent” investment environment and a business environment that “expeditiously facilitates” investment, in practice it substantially diminishes the investment protection afforded to foreign investors under South Africa’s BITs at present.
This is for several reasons. First, the definition of “investment” requires more than shares or contractual rights, which would be typical of a BIT, but a “material economic investment or significant underlying physical presence” in South Africa. More important, unlike the BITs, the bill adopts a parsimonious approach to expropriation by expressly limiting its circumstances. Indirect expropriation now appears exempt from protection, as are measures that protect or enhance state security, or where there is a deprivation of property without any concomitant acquisition of ownership by the state. Likewise, unlike the BITs, which offer full market-value compensation in the event of an expropriation, the bill’s measure of compensation echoes section 25 of the constitution by providing an “equitable balance” between the public interest and the affected party, having regard to a number of factors, including the use of the investment and the purpose of the expropriation.
The bill is emphatic about the state’s right to regulate in the public interest. To this end, it permits the government (or any of its organs) to take measures which, among other things, “redress historical, social and economic inequalities”, as well as (presumably with an eye on the mining industry) “foster economic development, industrialisation and beneficiation”.
While the bill commendably prohibits discriminating against foreign investors by according them national treatment as well as equal security and treatment in relation to domestic investors, the important BIT prohibition on the unfair and inequitable treatment of such investors is completely absent from it. This key rule-of-law protection of procedural fairness requires states not to act arbitrarily or abusively towards foreign investors, through coercion, duress or harassment, or by failing to respect the fundamental principles of due process.
Perhaps most important, recourse to international arbitration, a fundamental feature of investor-state dispute settlement under the BITs, is explicitly removed under the bill. Investors will now have to avail themselves of the department’s mediation facilities, and have recourse to the South African courts or domestic arbitration under South Africa’s antiquated Arbitration Act of 1965. This is a marked deviation from international best practice in relation to investor-state dispute settlement as access to independent and impartial international arbitration is a hallmark of effective investor protection.
Although the department’s BIT review makes much of the “excellence” of the country’s judiciary, this misses the point. The domestication of investor-state dispute settlement is exceptional in international investment law. Although Australia’s previous Labor government insisted on it in the US-Australia free-trade agreement, the present Liberal-National coalition has reinstated investor-state dispute settlement in the recently concluded Australia-South Korea free-trade agreement, thus removing one of the department’s key country exemplars.
There is a good reason for this. Access by investors to international arbitration, rather than the domestic courts, provides them with an independent and neutral forum that will not be influenced by local policy considerations. While the department has described international arbitration as “unpredictable”, South Africa’s continued refusal to sign and ratify the Washington Convention, which established the International Centre for Settlement of Investment Disputes in 1965, means, ironically, that it cannot invoke the centre’s ad hoc review mechanism for setting aside the most egregious arbitral awards.
Bizarrely, while the bill provides investors with no protection for unfair and inequitable treatment, affords them below-market-value compensation for expropriation and denies them access to international arbitration, all of these protections are expressly provided for in the Sadc protocol that South Africa ratified in June 2008. The protocol is based on the creation of a “predictable” investment climate through the enforcement of “open and transparent” investment policies. Importantly, the protocol is not restricted to Sadc investors, but to all investors with a lawful investment in a Sadc member state. The only qualification is that an investor must first exhaust its domestic remedies before having access to international arbitration. In addition, the protocol applies only to investment disputes arising after its entry into force on April 16 2010. South Africa could, of course, withdraw from the protocol on 12 months’ notice to Sadc, but given the importance of the regional integration project, this would be politically difficult.
As all the protections of what the department describes as “old-style BITs” are contained in the protocol, one wonders not only how it came to be ratified in 2008, but how it can be squared with the lesser investment protection now on offer under the bill. Or, to paraphrase George Orwell, is this a case of some BITs being more equal than others?
Leon is head of the mining sector group at Webber Wentzel.
Source: http://www.bdlive.co.za/opinion/2014/01/16/diluting-foreign-investors-protection-makes-no-sense
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EAC issues SQMT regulations to facilitate regional trade
The East African Community has issued regulations to enhance the operationalization of the EAC Standardization, Quality Assurance, Metrology and Testing Act (SQMT) of 2006. The SQMT regulations are geared towards facilitating regional trade.
The Regulations were approved by the Council of Ministers in November 2013 and are issued in line with Article 6 of the Protocol on Establishment of the EAC Common Market, with reference to Free Movement of Goods.
Article 6 of the Protocol stipulates among others laws that the free movement of goods shall be governed by EAC SQMT Act, 2006 and regulations made there under. The regulations include: The EAC SQMT (Product Certification in Partner States) Regulations, 2013; The EAC SQMT (Designation of Testing Laboratories) Regulations, 2013; and The EAC SQMT (Enforcement of Technical Regulations in Partner States) Regulations, 2013.
The EAC SQMT (Product Certification in Partner States) Regulations, 2013; provides for certification bodies in the Partner States on the basis of Product Standards. The regulations will facilitate the issuance of quality marks on products conforming to regional and international standards and provide consumer confidence of the products traded in the region. The regulations also provide for emphasis on recognition of each Quality Marks issued by other Partner States Quality Marks in conformity assessment of goods moving across borders.
The EAC SQMT (Designation of Testing Laboratories) Regulations, 2013; provides for the Ministers responsible for Trade in the Partner States to designate Testing Laboratories to be recognized in the region. The regulation will facilitate an organized recognition of testing laboratories to test goods for conformity assessment of goods in the region.
The EAC SQMT (Enforcement of Technical Regulations in Partner States) Regulations, 2013; provides for Partner States to declare or notify a technical regulation which may create barriers to trade and obliges Partner States upon request to explain the justification for that technical regulation.
The above mentioned regulations are expected to be approximated and/or aligned to the existing National Laws as required by the Treaty establishing the East African Community.
Source: http://www.eac.int/index.php?option=com_content&view=article&id=1458:eac-issues-sqmt-regulations-to-facilitate-regional-trade&catid=146:press-releases&Itemid=194
BRICS pack a good initiative by emerging nations: Joseph Stiglitz
Nobel laureate Joseph Stiglitz today said the creation of BRICS (Brazil, Russia, India, China and South Africa) was a good initiative by emerging market economies as they have resources to have better economic growth.
“The one good news is the BRICS pack. That is the one initiative that has come from the emerging markets…. The BRICS, their GDP is today better than the advanced world, they have the resources to do it and the also there is a need (for them to grow),” said Stiglitz.
Stiglitz, who is also a professor at the Columbia University, was addressing a seminar on ‘Global Financial Crisis: Implications for Developing Economies’ organised by the United Nations ESCAP (Economic and Social Commission for Asia and the Pacific).
BRICS which is a grouping of five developing or newly industrialised countries are distinguished by their large and fast-growing or emerging market economies.
However, he said that the emerging countries should rely on each other and internal demand for their growth to keep going as the world economy is not growing well.
“Europe and America were the centre of Lehman Brothers collapse five years back. People in Europe are celebrating the fact that next year the growth is likely to be positive.
“In India an average growth of 5-6 per cent shows that these economies are not performing well… The emerging countries cannot rely on the developed countries as a source of economic growth. They have to rely on each other and on internal demand,” he added.
He also said that the creation of euro was a big mistake and there is a need to restructure the euro zone.
“In Europe the fundamental problem is that the euro was a mistake. And the leaders of Europe have not figured out what to do with this big mistake. What is needed is to restructure the euro-zone and that is very difficult.”
Stiglitz also said that the single minded focus by the western countries on the inflation was wrong and there should be more focus on employment creation and generation of growth.
Also, the Deputy Chairman of the Planning Commission Montek Singh Ahluwalia who also addressed the seminar, said India’s fundamentals are strong and it will not be much affected by global factors.
“For India the fundamentals are strong and savings rate are high…so our investment rate should be about 38 per cent. So somewhere between 2-2.5 per cent is the Current Account Deficit (CAD) that needs to be fair…. the percentage of the resources in terms of investment that is going to come from internal sources is very very high.
“So whatever happens on the global front don’t make much difference (for India),” Ahluwalia said.
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Angola’s national director for trade calls for quotas on imports of food and drink
The national director for Foreign Trade of the Angolan Trade Ministry, Adriano Martins, in an interview with Angolan National Radio called for the introduction of quotas on the import of food and drink into the country.
“Angola is a country with natural potential to produce a large amount of the products that it now imports but by September 2013 the country spent over 360 billion kwanzas on food products and almost 40 billion on drinks,” he said adding that it was a lot of money that was leaving the country and some move had to be made to prevent it.
To overcome the situation Martins called for the introduction of quotas on imports of certain goods, which may be “seasonal, quantitative or tariff based,” according to state-run newspaper Jornal de Angola.
The actual application of new customs tariffs on 1 January has brought substantial changes in terms of increasing charges on imported goods with a view to encouraging national production in sectors in which Angola has competitive advantages and production capacity, compared to its foreign competitors.
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Zimbabwe’s massive diamond fields discovery to bring billions
Zimbabwe says it has discovered new diamond fields ‘almost the size of Swaziland’ and expects to realise billions of dollars from mining activities.
The announcement at the weekend came barely a month after companies operating at the Chiadzwa diamond fields, discovered in 2008, said mining operations were becoming unviable as the alluvial diamond resources were running out.
The more than five companies wanted to be allocated new claims, saying underground mining would be too expensive in a country that is struggling to attract direct foreign investment.
Deputy Mines minister Fred Moyo told state media that the diamond fields located between Manicaland and Masvingo province stretch over 10,000 square kilometres.
He said the government has already begun sourcing funds to kick start operations
“It is a very huge area. So, obviously the whole area cannot contain a large concentration of diamonds, but the fact is there is huge potential,” Moyo said.
“What we need to do is mobilise funds to carry out extensive exploration that will determine the areas profitable to mine.
“We are actually going to use part of our national budget allocation to send our experts to carry out exploration activities in the area.
“The Umkondo Basin is a reserved area. It has huge potential of diamond reserves and as government we need to urgently move in to determine the areas that possess a high concentration of diamonds,” he added.
All the companies that were granted mining licenses at the Chiadzwa diamond fields formed joint ventures with the Zimbabwe Mining Development Corporation.
The companies in Marange have been mainly concentrating on alluvial mining, which is easier and less-costly compared to underground mining.
Zimbabwe’s first-ever diamond auction in Belgium got off to a slow start last December with the majority of the 279 723 ct gems being of low quality and not properly cleaned, government said.
The Antwerp auction came three months after the European Union removed sanctions on the southern African country’s state mining company.
The Marange diamond fields, 400 km east of Harare, have been the focus of controversy since 20 000 small-scale miners invaded the area in 2008 before they were forcibly removed by soldiers and police.
Human rights groups say up to 200 people were killed during their removal, charges denied by President Robert Mugabe’s government.
Zimbabwe is believed to hold 25% of the world’s alluvial diamonds.
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Mint condition: countries tipped as the next economic powerhouses
Forget the Brics and the Civets, Mexico, Indonesia, Nigeria and Turkey are the new kids on the bloc according to economists
Meet the Mints: Mexico | Indonesia | Nigeria | Turkey
Jim O’Neill. Photo credit: Bloomberg
The Brics are Brazil, Russia, India and China – four emerging economies lumped together in 2001 by Jim O’Neill, then at Goldman Sachs, to show that western investors needed to take notice of what was happening in the post-cold war global economy.
Robert Ward, of the Economist Intelligence Unit, linked Colombia, Indonesia, Vietnam, Egypt and Turkey but the Civets never really took off. Now O’Neill is championing the Mints, a name first coined by the fund managers Fidelity, for what he thinks will be the second generation of emerging market pace-setters: Mexico, Indonesia, Nigeria and Turkey. (See also: “Who you calling a BRIC?” – Column by Jim O’Neill, Bloomberg, 13 November 2013)
The Mints share some common features. They all have big and growing populations with plentiful supplies of young workers. That should help them grow fast when ageing and shrinking populations will lead inexorably to slower growth rates in many developed countries (and China) over the coming decades.
And they are nicely placed geographically to take advantage of large markets nearby, with Indonesia close to China, Turkey on the edge of the European Union and Mexico on America’s doorstep.
Nigeria’s geographical advantages are less immediately obvious, although it does have the potential to become the hub of Africa’s economy at a time when the continent is enjoying a sustained period of strong expansion.
Strong growth in Asia has pushed up demand for the fuel and raw materials needed for industrialisation and three of the Mints – Mexico, Indonesia and Nigeria – are leading commodity producers. Of the four, only Nigeria is not already a member of the G20 group of developed and developing countries.
Even so, financial markets are wary about treating what is actually a disparate group of countries as a bloc. If the Brics are now a bit old hat, it is in part because their reputations are a little tarnished.
Western investors who piled into Bric stock markets expecting to make a packet have had their fingers burned and in recent years would have done better keeping their money at home. Only China has really lived up to the growth hype and is now the world’s second biggest economy.
But even then stock market performance has been weak and there are now concerns that attempts by Beijing to move to an economic model less dependent on credit will lead to a hard landing in 2014.
At one point India looked likely to rival China as the emerging market powerhouse but it had a wretched 2013, suffering from high inflation, a rising current account deficit and a run on the rupee.
Russia is seen as over-dependent on its oil and gas sector and unfriendly towards foreign investors; Brazil, like many other emerging economies, proved vulnerable to hot money flows.
Tanweer Akram, economist at ING Investment Management, notes that investors pulled back from several emerging markets last year and are likely to be discriminating in the future, reducing exposure to “countries that are vulnerable on the basis of current account deficit, inflation above target and muted growth”.
Turkey and Indonesia are both countries where the bullish investor mood of a couple of years ago has been replaced by a more cautious approach. Of the two, Turkey is the more immediate concern, with the International Monetary Fund calling late last year for interest rates to be raised by 2.5 percentage points to tackle 8% inflation.
Nigeria is seen as more attractive in part because it has shown strong growth despite its long-term structural problems: power shortages, corruption and a poor education system.
The markets like the market-friendly reforms in Mexico and see it, rather than Brazil, as Latin America’s best bet. Even so, Mexico’s fortunes are closely linked to those of its powerful neighbour across the Rio Grande.
In one sense, the very notion of Brics and Mints is helpful. It illustrates the way in which the economic balance of power has shifted from the developed to the developing world over the past 20 years and will continue to do so over the next 20.
In Nigeria’s case, it illustrates the possibility that the next “tiger” economies could well be in Africa.
But it is well to remember that the countries are only grouped together because they make a neat acronym. They are all different; the suggestion that they are not is Colombia, Oman, Burundi, Botswana, Laos, Egypt, Romania, Sudan.
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India-Africa to work towards securing bilateral ties
Entering 2014, the year that will see the hosting here of the Third India-Africa Forum Summit, the focus will be on the key element of maritime security cooperation between the neighbours separated by the Indian Ocean, the key waterway for trade between the West and the East.
Besides India’s growing economic engagement with Africa, maritime security and naval capability are of crucial importance for a globalizing India increasingly dependent on external markets and natural resources, as well as on global employment opportunities.
Pointing to this global context, where India is an emerging power, Prime Minister Manmohan Singh told a conference of Indian Navy commanders that “as we strive to realize our due place in the comity of nations... it goes without saying that the realization of our goal lies in widening, deepening and expanding our interaction with all our economic partners, with all our neighbours, with all major powers.”
The Indian Ocean region is home to more than a quarter of the world’s population, and its waterways carry half of the world’s cargo ships and two-thirds of the world’s oil shipments.
India has, in recent years, sought to expand its sphere of influence in the western Indian Ocean facing the coast of eastern Africa, with the primary driver of the maritime security initiative being the operations to tackle piracy off Somalia. The Indian Navy’s efforts in the region has borne fruit in the maritime cooperation with island nations like Mauritius and Seychelles, besides significant initiatives involving some continental countries.
“On the premise that the Indian Ocean is a natural area for us, the entire African coast facing us is important. In fact, island countries like Mauritius and Seychelles are absolutely vital for us,” Arvind Gupta, director-general of the defence ministry-funded think-tank Institute of Defence Studies and Analysis (IDSA), told IANS.
As an instance of maritime cooperation, he pointed out that India had sent a naval ship to Mozambique to provide security for the 2003 African Union summit in capital, Maputo. This was followed by India’s despatch of two patrol boats for assisting in security during a World Economic Forum, leading to the signing of the 2006 MoU by which the Indian Navy engages in regular patrolling off the Mozambique coast.
IANS had earlier reported on the naval cooperation with Djibouti, in the Horn of Africa, to combat the threat posed by piracy off the coast of Somalia.
By a 2003 accord between India and Mauritius, the Indian Navy has patrolled the island’s exclusive economic zone.
“We have to tell Africans about what our policy is on the Indian Ocean, we need to have a strategic dialogue,” Gupta noted.
The second India Africa Forum Summit (IAFS) in Addis Ababa in May 2011 emphasised the renewed focus of India to strengthen and enhance its partnership with countries in the African continent
Greater economic engagement has also been crucial for boosting ties between Africa and India. India’s trade with Africa amounted to $68 billion in 2011-12. At the third India-Africa Trade Ministers’ meeting last year, the trade target was set at $100 billion for 2015.
The international security communities currently engaged in addressing the issue of maritime insecurity in the region are the Indian Ocean Naval Symposium (IONS) that includes naval representatives from the littoral states, and the Indian Ocean Rim Association for Regional Cooperation (IOR-ARC), the chair of which was handed over by India to Australia at its Perth meeting last October.
Pointing out that India is situated astride one of the busiest sea-lanes of the world, Manmohan Singh has said the country is well positioned to become a net provider of security and stability in the Indian Ocean region and beyond.
“We have also sought to assume our responsibility for stability in the Indian Ocean region. We are well positioned to become a net provider of security in our immediate region and beyond,” he has said.
Since the India-Brazil-South Africa (IBSA) formation, three IBSAMAR joint naval exercises have been conducted off the South African coast till date.
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Is 2014 the Transatlantic trade deal’s ‘make-or-break’ year?
Arguably the most important economic development last year was the announcement of a new push toward a trade deal between the United States and the EU. Almost a year after President Barack Obama presented the initiative in his February 2013 State of the Union speech, negotiations over the Transatlantic Trade and Investment Partnership (TTIP) have made steady progress. But several challenges remain unaddressed while new ones loom on the horizon. As a result, it is uncertain whether a final agreement will be ready in time at the end of this year.
As the world’s largest trading and investment partners, representing three-quarters of global financial markets and almost half of world trade, any trade deal made between the U.S. and the EU would naturally be of enormous proportions. According to some official estimates, TTIP could add as much as $130 billion a year to the U.S. economy and 119 billion euros to the EU economy. The significance of this must not be underestimated. If the EU were to add two percent annual economic growth due to TTIP as some economists predict, this would be equal to adding a market the size of Argentina to the global economy every year.
Indeed, the creation of a single market for trade and services stretching from Hawaii to the Black Sea could stimulate the economies and create hundreds of thousands of new jobs in the U.S. and Europe – something that is desperately needed these days of slow growth and massive unemployment. TTIP could also help pave the way for smoother capital flows over the Atlantic, to the benefit of investors and entrepreneurs alike. Furthermore, TTIP is an opportunity for the U.S. and EU to align regulation that could reduce costs of business and investments while keeping high standards in place. If successfully agreed upon, TTIP may even serve as a model for the rest of the world and set the default global standards in production and trade.
Progress on the current negotiations has been made. In December, U.S. and EU officials completed their third round of TTIP negotiations. The fourth round is scheduled in March following a review session between U.S. and EU trade representatives. However, as negotiations now begin in earnest, more controversial issues will likely begin to surface, including divergent approaches to legislation, standards and regulations. Vested interests and looming protectionism on both sides of the Atlantic remain strong. There is also some fear in Europe that the trade deal would disproportionately favor American business interests at the expense of European ones.
As negotiations enter into the next phase, pressure from environmental groups, labor unions and consumer advocates will also increasingly be felt. Many of these groups have recently stepped up their criticism of TTIP. While this debate is of course essential, it also puts a heavier burden on proponents of the trade deal to explain TTIP’s potential benefits and debunk skeptics’ criticisms.
On top of this, the NSA scandal has already threatened to derail the TTIP negotiation process or at least divert attention away from it. Although EU officials claim that data protection and privacy issues lie outside the realm of the current trade negotiations, European outrage over the Edward Snowden revelations could still spill over into adversely affecting the TTIP negotiations. A final potential obstacle is the upcoming elections in both the EU and the United States this year. Both the election to the European Parliament in May and the midterm elections to the U.S. Congress in November could give populist groups like Europe’s anti-immigration parties and the Tea Party movement more of a say over trade policy.
In sum, 2014 will be a pivotal year for TTIP. Though the end of the year deadline for reaching a final agreement may ultimately prove too ambitious, this alone is not necessarily a reason for despair. On the contrary. Given what is at stake – a trade and investment deal of epic proportions with potential to drive economic growth and job creation on both sides of the Atlantic over the next decade – EU and U.S. leaders must use this year to push forward toward a deal that is as ambitious and as comprehensive as possible. They have no other choice but to do this – TTIP is a once in a lifetime opportunity that is simply too big to fail.
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COMESA: Regional market under siege
It is generally agreed amongst the international community, at least in principle, that liberalisation of trade and allowing the free movement of goods, services and people, among countries that share common geographic boundaries and states situated at different poles of the earth, is a must. In order to make the liberalisation of trade a reality and to ensure the free flow of goods and services, states initiate various types of structures.
The Common Market for Eastern & Southern Africa (COMESA) is Africa’s largest economic community. COMESA was established by a treaty agreed in 1993 by 15 east and southern African states. Before this, some east and southern African states had tried to develop other structures. These include the sub-regional Preferential Trade Area (PTA) in 1978 and later the establishment of a Preferential Trade Area for Eastern & Southern Africa, in 1981. The latter became a stepping stone for the inauguration of COMESA.
This economic community embraces states with very differing economic, political and social experiences and legacies. Countries ranging from those with a large population size, such as Ethiopia, to countries with very small number of people, like Swaziland or Lesotho, are all members of this block.
Moreover, this block encompasses countries colonised by various European powers, such as Great Britain and France. This continues to test the vitality and stamina of African states to establish structures able enough to quench the interest of African minds and hearts. Hence, the difference of interests among member states of the common market makes the forum special.
Of course, the block is vital, in that its success or failure would help to test the capacity of African states to establish alliances ready to accommodate the differing interests of various states.
The inauguration of COMESA spurred on the intra-trade relationship of its member states. Research confirms that Intra-COMESA trade has grown from 834 million dollars in 1985, to 1.7 billion dollars in 1994, 15.2 billion dollars in 2008 and 17.4 billion dollars by the end of 2010.
An almost six-fold increase in intra-COMESA trade has happened since the launch of the Free Trade Area (FTA) in 2000. Even though intra-COMESA trade has boosted the economic power and capacity of member states, it has also proved to be a dining room for various quarrels and animosities among member states and some wayward businesses, if not well regulated.
Hence, regulation of the activities and conducts of market actors – obviously at a regional level – is the only option to mitigate market activities and conducts that might have adverse effects on the economies of member states.
As the treaty establishing the common market eloquently epitomised, member states of the block agreed that any practice which negates the objective of free and liberalised trade shall be prohibited. To this end, the member states agreed to prohibit any undertaking which has as its objective preventing, restricting or distorting competition within the common market.
There are various manifestations in which the actions of market actors in one member states can create an adverse impact on the market situation of other member states. For example, the merger of companies in one member state may have an adverse effect on the economic activities of another member state.
The merger of companies producing goods and exporting the same to the member states of the common market may enhance the market share and power of the merged companies. The merged companies in one member state could, however, also abuse their market power by fixing the price of goods exported to other member countries, which makes intervention or regulation indispensable.
Consequently, the enhancement of the market power of the merged companies in one member state of the common market may rob or descend the market power of companies of the importing states. Hence, mergers that have a regional dimension should be notified to the COMESA competition commission, by the merging actors.
Even though the treaty clearly obliged member states of the block to take various measures to enhance the participation of private businesspeople in the market and prohibit some business activities that have a negative impact on the economic or social life of member states, effective regulation frameworks that enumerate detailed provisions were not proclaimed until 2004.
COMESA’s competition regulation, which is one of the instruments used to regulate business activities and market actors, was enacted with the purpose of promoting and encouraging competition. This was to be achieved by preventing restrictive business practices and other restrictions that deter the efficient operation of markets. It is believed that this would enhance the welfare of the consumers in the common market, and protect consumers against offensive conduct by market actors.
This regulation has established the block’s competition commission. This is one of the executive wings of the common market entrusted to enforce market regulation. The commission is empowered to monitor, investigate, detect, make determinations or take action to prevent, inhibit and penalise uncompetitive undertakings. This effort is supported by the Board of Commissioners – the supreme policy body of the commission – which is entrusted with adjudicating on any matters related to the enforcement of the competition regulation and hear cases of appeal that come from the decision of the commission.
Despite the fact that the establishment of the competition commission was epitomised by the regulation, which is proclaimed in 2004, the commission has incepted its operation in 2013. Hence, it is too early to assess the success or failure of this institution. However, it is tantamount enough that for the realisation of effective and workable competition between market actors in the COMESA member states, a lot has to be done both by member states of the common markets and organs of COMESA.
Member states of COMESA are obliged to take measures, such as domestication of the treaty provisions of the common market that relate with competition matters. Even though member states has signed the establishment treaty, differing procedures of ratification of instruments by member states continue to affect the full and uniform realisation of the competition regulations in the common market.
In some member countries, both the treaty and competition regulations are not binding instruments, for they are not domesticated to the law of their own jurisdictions. Hence, national competition authorities of those countries are not legally obliged to collaborate in different areas with the COMESA competition commission to regulate their markets.
This would, in one way or another, reduce the legitimacy and respectability of the COMESA competition regulations enforcement organs. To make the intra-trade relation between member states of COMESA more effective, robust and sustaining, member states of the common market should domesticate the COMESA treaty and competition regulations as a part of the law of their respective jurisdictions. They should strive for the realisation of the aspiration of the block, which is to see a common economic community.
In addition, all member states should equally own the COMESA institutions and participate through their endeavour, working together as a team. It is easily traceable that all member states of the common market are not equally participating and contributing to the effectiveness of the block.
To realise any effective common market, member states should contribute their level best for the realisation of the consensual objectives. No different is the case with COMESA.
But, for this to happen, COMESA’s competition commission should strengthen its enforcement power to fully carry out its responsibilities. Specifically, it should make a bold advocacy move to domesticate the regional competition regulations in all member states’ jurisdictions.
Tesfaye Niway is a presiding judge at the Adjudicative Tribunal of the Ethiopian Trade Practice and Consumer Protection Authority
Source: http://addisfortune.net/columns/regional-market-under-siege/
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New partners in Africa: How can African countries even the playing field?
Africa has seen a dramatic rise in engagement with emerging market economies. In 2012, China’s value of African trade topped $220 billion. African exports to and from India grew by 32.2 and 26.3 percent per year, respectively, from 2001-2011. Russia supplies many African countries with military aid. Brazil, Turkey, Malaysia and Iran have dramatically increased their investments on the continent. Clearly, Africa is increasingly relying on new partners – especially other emerging markets – for aid, trade and other types of support. These partnerships are attractive for Africa because many of these new partners offer “no strings attached” aid. For example, China recently gave Nigeria a $1 billion dollar no-interest loan for infrastructure development in four major Nigerian cities. The loan has no conditional requirements attached.
However, these partnerships are not always equal, and Brookings Africa Growth Initiative Director Mwangi S. Kimenyi argues that African countries may be getting the raw end of the deal. Many of these new and growing relationships may be more about exploiting Africa’s natural resources than advancing the region’s growth and development. In addition, these partnerships are often entered into with a lack of transparency and accountability. Potential “land grabs” and irresponsible natural resource extraction practices threaten Africa’s already troubling food security situation.
In his Foresight Africa paper, Kimenyi argues that, while these new partnerships offer the region new opportunities for economic growth, African policymakers need to be vigilant, focused and proactive when negotiating these partnerships to ensure that they are inclusive and benefit all those in the region.
As Africa’s position in the world continues to grow and evolve in 2014, the Brookings Africa Growth Initiative continues its tradition of asking its experts and colleagues to identify what they consider to be the key issues for Africa in the coming year. Download Foresight Africa 2014 below to learn more about Africa’s new partnerships as well as other critical issues for the region.
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The next challenge: Implementing a new U.S.-Africa policy
2013 ushered in the most significant change in the United States’ Africa policy since the passing of PEPFAR 10 years ago. The unveiling of investment-focused initiatives – Power Africa and Trade Africa – reflects not just a change in how the Obama administration views the continent, but also how foreign investors have prioritized it. But policy rarely achieves its objectives without equal attention to implementation. A number of implementation barriers – old regulations and new policies working at cross-purposes, and limited on-the-ground capacity – threaten to undermine America’s new approach to the continent in 2014. If 2013 was marked by change in U.S. strategy towards Africa, 2014 will be marked by the recognition that 90 percent of the success of that strategy is implementation.
Powering Power Africa: Power Africa is arguably the most significant new piece of policy from the Obama administration, so there is a lot at stake to get it right. Spanning 10 different government agencies from the Export-Import Bank to the much smaller African Development Foundation, it is a big policy. But there are caveats: The funds are limited, non-appropriated and subject to very specific regulations, and the timeline (5 years) is arguably too short to make a dent in Africa’s long-term power sector. Simply sourcing, vetting, preparing and finding the deal teams able to assess a power project can take up to 24 months – after which the administration may well be in handover mode. As the initiative stands, it limits funding for projects that exceed a specific carbon emission cap (100,000 tons of carbon dioxide equivalent per year), which effectively eliminates natural gas projects on the continent, not to mention coal-fueled power plants. Leaving the carbon cap as it is would cripple any chance of success for Power Africa and demonstrate to Africans America’s obsession with green investment in every country other than its own.
Building Trade Africa: Even although Trade Africa has received less attention, its promise for driving the continent’s growth is arguably greater than powering Africa. The administration has been less clear about its intent here, though. An initial focus on the East Africa Community (EAC) is a good and well-considered entry point. And although Trade Africa will establish the new U.S.-EAC Commercial Dialogue and advance the Department of Commerce’s Doing Business in Africa campaign, these projects will be hard to implement with only a few Commerce Department officials on the continent and, despite exceptional leadership by EAC Rwandan Secretary-General Richard Sezibera, a woefully under-resourced EAC Secretariat in Arusha, Tanzania. The imbalance of resources and priorities pose substantial structural constraints for Trade Africa’s success. A more effective use of U.S. resources might be to help advance existing initiatives that promote the financial architecture of regional trade, such as the East Africa Commodity exchange (EAX).
Encouraging Compliance from the Ground Up: The compliance and due diligence industry is expanding rapidly, and 2014 will see additional regulations increasing the burden for companies and investors. Even as Power Africa promises $7 billion for the continent, one new piece of regulation – Section 1502 of the Dodd Frank Act, “conflict minerals” – is estimated to cost investors $8 billion in compliance costs alone next year. So, what can the U.S. government do to achieve market transparency, but also effective and efficient regulation? The answer might be to help generate more and better data on these markets. New regulations and compliance standards can only be institutionalized and effective with more information and data. For broader regulatory requirements such as Section 1502, the U.S. government should be supporting on-the-ground initiatives, leveraging local knowledge and advancing new methods for extracting more information about local environments so that corporate compliance officers can make well-informed decisions.
Six months after the announcement of Power and Trade Africa, the focus in 2014 will shift to implementation, an altogether different and bigger challenge. U.S.-Africa investors are right to be optimistic about the direction of the relationship, but moving beyond an expression of commitment to getting things done will require a focused approach that more clearly syncs priorities with resources.
The Foresight Africa blog series is a collection of blog posts from Africa experts and policymakers on what they think the top priorities for Africa should be in 2014. This blog series is part of the larger Foresight Africa project that aims to help policymakers and Africa watchers stay ahead of the trends and developments impacting the continent.
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Will there be an African Economic Community?
Today, before the House Foreign Affairs Committee’s Subcommittee on Africa, Global Health, Global Human Rights, and International Organizations, Africa Growth Initiative (AGI) Senior Fellow Amadou Sy and Nonresident Fellow Witney Schneidman will testify before Congress to answer the question, “Will there be an African Economic Community?” Sy and Schneidman will be joined by Peter Quartey, senior economist at the Institute of Statistical, Social and Economic Research (ISSER) and head of the department of economics from at the University of Ghana. ISSER is one of six think tank partners that with which AGI works throughout Africa. Stephen Lande, president of Manchester Trade, will also testify.
Watch the related testimony, January 9, 2014 at 2 p.m. EST
The Abuja Treaty, signed in 1991 by the African Union, set the path for how the African Economic Community (AEC) should progress via regional economic communities (RECs). Now, African member countries are working on the six stages of the AEC. They have already established eight RECs, which was stage I. Now the challenge is to harmonize tariffs (stage II) and create Free Trade Area (FTA) (III). The FTAs are expected to progress to a continent wide customs union (stage IV) to be followed by an African common market (V) with a single currency. The ultimate goal for the AEC is to merge the eight RECs into one economic and monetary union (stage VI).
The future African Economic Community and the current regional economic communities can create economic, social and security benefits not only for African countries, but also for the United States. As Sy, Schneidman and Quartey will testify, the U.S. should support regional integration efforts of the AEC.
Despite a stellar growth performance in the last decade – and a projection for even faster growth heading toward 2015 – Africa’s growth in intraregional trade is fairly stagnant. Africa trades relatively little with itself (12 percent), especially compared to North America (40 percent), Asia (30 percent) and the European Union (60 percent). Typically, individual African countries are small, fragmented economies connected by sparse infrastructure and expensive transportation routes.
Schneidman, in his testimony, reminds us that the idea of the African Economic Community is not a new one. The African region under the African Union has been interested in regional integration since most countries gained independence in 1960s, and the Abuja Treaty created the roadmap. Both Schneidman and Sy agree that regional integration is happening, albeit at uneven paces across the RECs in terms of the six stages. A prediction of whether every nation in the planned AEC will integrate both economically and monetarily is difficult to determine.
In his testimony, Sy suggests that improvements in intraregional trade could make sub-Saharan Africa a more attractive trading partner. Working with Africa on a regional basis may serve to reduce some transaction costs and increase the volume of trade to which the U.S. has access. For example, Kenya alone ranks as the U.S.’s 105th largest trading partner (2011 USTR figures), but if all of the East African Community (EAC) countries (Burundi, Kenya, Rwanda, Uganda and Tanzania) were a combined trading partner, they would be the U.S.’s 80th largest partner (2012 USTR figures).
Quartey will testify on the specific experience of Ghana and the Economic Community of West African States (ECOWAS). He emphasizes that economic benefits are not the only advantages to regional integration. In particular, Quartey suggests that U.S. support for ECOWAS will assist in the development of strong institutions that can stop the spread of terrorism and insecurity across West Africa.
To support deeper integration, Sy recommends expanding the White House’s Trade Africa initiative to encompass more RECs beyond the U.S.’s current partnership with the EAC. Schneidman highlights the need for further investment in the USAID Regional Trade Hubs in Africa to help promote the Africa Growth and Opportunity Act and increase two-way trade with Africa. The scholars also note that the expansion of current U.S. initiatives in Africa could increase regional integration and open up bigger export markets for U.S. businesses. In short, the progress toward regional integration is beneficial for both the U.S. and African economies – whether or not a completely integrated Africa is realized by the suggested deadline of 2028.
Source: http://www.brookings.edu/blogs/africa-in-focus/posts/2014/01/09-african-economic-community-pugliese
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Global trade talks host injustice
For developing countries, it seems, the more things change, the more they stay the same. Despite all the talk of global power shifts and the rise of emerging economies, global trade talks have once again forced developing countries on to the back foot. This is despite having reason and ethics on their side.
The inability to agree a decisive deal reflects the intransigence of some governments in the face of what seem to be commonsense and fair proposals to rectify large anomalies in the trade rules, and demand a pound of flesh in return for every such “concession”.
The Doha development round of trade talks is all but dead, and only two issues have survived to merit serious consideration. One is “trade facilitation” – the harmonising and standardising of customs rules and procedures that is an agenda of the global north to ease import practices across the world. There are the usual noises being made about how this will dramatically increase both trade and employment worldwide, on the basis of spurious empirical exercises.
The other issue is more central: the focus on agricultural subsidies, which affects the livelihoods and food security of more than half the world’s population. Unfortunately, some wealthy countries have demanded acceptance of the former, while refusing to make even the most obvious adjustments to meet the latter.
Since the World Trade Organisation’s (WTO) Agreement on Agriculture took effect in 1995, world trade patterns have changed and there are forces distorting food trade that are not being adequately addressed. Subsidies that wealthy countries give their farmers and agribusinesses are mostly classified as “non-distorting” measures and remain high.
A few multinational agribusinesses have increased their domination of global trade and food distribution. Speculation in commodity futures markets is creating volatile price movements that do not reflect true changes in demand and supply.
All this is bad for small producers, who do not benefit from price increases and lose out when prices decline with import surges. It is also bad for poor consumers, who face much higher prices for their food. In many developing countries, this has created two linked problems: food insecurity (because of high and volatile food prices) and livelihood insecurity of food producers (because of rising costs and uncertain supply).
In the meantime, developing countries must find some way to ensure their citizens’ food and livelihood security. Many countries try to do so by introducing measures to make food affordable for low-income consumers or by encouraging domestic food production, particularly through supporting small farmers.
The trouble is that such measures sometimes come up against existing WTO rules. This is because of unbalanced and what should be archaic rules that allow higher levels of subsidies and protection for rich countries compared with developing ones.
The WTO recognises three kinds of agriculture subsidies. “Amber box” measures are those that distort trade most severely. Developing countries are allowed to provide such subsidies worth up to only 10pc of the total value of their agricultural production; developed countries are allowed up to five percent.
The second category of subsidies, the “blue box”, are considered slightly less distorting; developing countries are subject to an eight percent ceiling on their blue box support.
And finally, “green box” subsidies are those that are not thought to distort trade at all; these are not subject to any conditions or limitations. Examples of green box subsidies include direct income support to farmers, as well as policies for environmental protection and regional development. Most developed countries have shifted towards green box subsidies for agriculture, so they continue to provide enormous support to their farmers without breaching WTO commitments.
But developing countries trying to ensure food security may need more flexibility than global trade rules allow. To that end, the G33 – a coalition of developing countries at the WTO – has suggested broadening the green box to include policies such as land reform programs, the provision of infrastructure and rural employment initiatives.
It is important to expand the definition of green box support to account for the specific needs of developing countries. For example, some governments may find it necessary to provide crop-specific subsidies to encourage farmers to cultivate more food crops, thus lowering prices for consumers.
Government purchases of crops at fixed, or “administered”, prices can be an essential policy instrument. Under WTO rules, however, if governments pay farmers at rates that are even slightly above market prices when they are stockpiling food, those payments count toward the country’s 10pc amber box ceiling. But grain reserves can be essential to domestic food security, allowing countries to guard against sudden movements in global food prices. Such payments should also be classified in the green box.
Most bizarrely of all, to calculate the level of current subsidies, the WTO uses prices of 25 years ago (the average 1986-88 global prices). This is clearly ridiculous, since food prices have shot up since then. Recent prices should be used as the reference. But developed countries currently refuse to agree to this because “it will open up the agreement”.
Surprisingly, developed countries are contesting all of these points in the WTO negotiations. A “peace clause” that would temporarily suspend WTO actions against countries that exceed their amber box limit is being suggested as a fallback negotiating strategy. But such an outcome should be accepted only as a transitional measure towards full recognition of the legitimacy of such policies to ensure food security.
The WTO rules make a travesty of the first millennium development goal (MDG) – to reduce hunger. If the world community is truly concerned about hunger, then it should not let unfair trade rules reduce developing countries’ ability to do something about it.
Jayati Ghosh is professor of economics at Jawaharlal Nehru University, India, and the Executive Secretary of International Development Economics Associates (Ideas). This commentary is submitted to Fortune by Development Debate.
Source: http://addisfortune.net/columns/global-trade-talks-host-injustice/
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Free Trade Area panacea to Africa’s economic woes
Little economic grounding dictates that markets for products play a critical role in growing any economy, itself a key prerequisite for enhancing the livelihoods of communities. Assuming that the manufacturing base of a nation is sound, with various products being churned to the satisfaction of consumers, the market for such products will have the natural say in the determination of the profitability or otherwise of such business ventures. Markets for products will be essential in determining whether the manufacturing companies will break even or at least eke out profits so as to sustain production.
For industrial productivity to be a reality and if trickle-down effects are to grow the source of raw materials and ultimately generate employment either side of the production circle, a sound market for goods has to be in place or at least be generated through various strategies at the companies’ disposal.
It sounds refreshing as an African for the continent’s political leadership to have finally realised the economic gem in their midst, which is the market, a staggering billion-plus population with the extraordinary potential to change the economic fortunes of individual countries’ domestic economies. About one hundred trade and customs experts from the 26 countries under COMESA, EAC and SADC met in Mauritius to map the way forward on the free trade area (FTA) that brings the three blocs together.
Yes, there is practical optimism in Kenyan President Uhuru Kenyatta’s observation that “Strong partnership and co-operation between African countries will bolster trade and investment, consequently improving the living standards of people.”
Whilst China is an indisputable technological giant, its booming economy is partly attributed to its solid market, a staggering one in excess of a billion people. It is every economically successful nation’s secret arsenal. Ask yourself, is it a mere coincidence that the continent’s economic powerhouses such as South Africa and Nigeria also command huge populations? There is indeed power in huge populations which translate to thriving economies in the event of other fundamentals being correct.
Imagine if the whole of Africa was to become a single economic bloc with prudent trade rules being adhered to by individual countries, the continent will be a living paradise to its inhabitants. Such a huge economic bloc will enable small countries such as our own Zimbabwe, with massive potential to reignite its sleeping industrial base, to tap into the vast market for its products.
Those with a stable memory will recall that at its peak, Zimbabwe’s industrial capacity was a marvel for the whole of Africa. Had it not been for the illegal debilitating sanctions which were engineered by the British and their American kith and kin, with the tacit support of their local surrogates, the two Movement for Democratic Change formations, the country’s manufacturing industry could have been robust and intact.
It is pleasing to note that, the recently elected Zanu-PF Government has prioritised the retooling of the country’s industries in the short term. This is what the country needs for it to extract value from the envisaged Free Trade Area. Where a nation has a comparative advantage, it is bound to harness modest profits hence enhancing its economy for the benefit of its citizenry.
All the nations of Africa will benefit from the economies of scale, a simple economic principle where mass production has an effect of lowering prices for consumers’ benefit. With flexible boarder trade policies that cater for smooth movement of labour, production costs will be substantially low which will ultimately trickle to the people, manifesting itself in low prices. Certainly, the quagmire of poverty, which reflects itself in families failing to have decent meals, will be a thing of the past or it will at least be reduced.
There is no need for sceptics to press the panic button by suggesting that such a noble venture will suffer a stillbirth. As usual, in such a grand project which is earmarked to benefit the ordinary folks, merchants of doom, especially those of our own whose livelihoods are sustained by deriding anything African, will be quick to point out supposed anomalies.
Surely, such retrogressive personality need to be watched out for, for their agenda has always been to perpetuate foreigners’ interests. For once, as Africans we need to harness the abundant potential that we possess in order for the continent to grow economically in leaps and bounds.
Just a glance at the European Union, it is the amalgamation of energies by the various governments for the benefit of their citizens. Of course territorial integrity and sovereign issues are of paramount importance to all governments globally, but it is the crafting of economic policies that take aboard such critical pillars that define nationhood that will enable Africa to emerge strong from its deep slumber.
Whilst other continents and economic blocs are bereft of resources to support their economies, Africa is blessed with numerous raw resources whose judicious exploitation is the panacea to the total eradication of various economic and social quagmires afflicting Africa. Each country has to use its comparative advantage which will enable the rest to tap and gain from its expertise which will ultimately benefit the rest.
In order for Africa to sustain such an enormous economic project, there is need to invest in water-tight security which is a prerequisite for peace and stability. Peace and stability are key elements in the bid to achieve economic prosperity at the national and continental level.
For those who have visited Europe, it is quite clear that the political and economic bloc invest so much in security which has resulted in the relative wealth which has accrued to their citizens and countries. Africa should not be an exception as it aims to realise this crucial goal of economic prosperity. Security should always be available to citizens as they undertake their daily chores.
There is therefore need for the various economic blocs in Africa that peace is made available in some trouble spots such as the Renamo-engineered menace in Mozambique, the need to halt the volatility that now characterises the Great Lakes region, the need to bring normalcy in West Africa where coups have become the norm and the need to ensure that the unrest in North Africa is managed so as to concentrate on economic progression.
A casual look at the unrest bedevilling these various spots in Africa will unravel that the hand of former colonisers is ubiquitous in all these conflicts as they attempt to consolidate their hegemony over Africa’s resources. Ironically, it is for the benefit of their citizens at the expense of Africa.
Therefore, the greatest threat to the establishment of this noble economic initiative are the rapacious former colonisers who view it as a threat to their erstwhile illegal role of distributing Africa’s resources as if they were theirs. Africa, it is time Africans control their destiny by ensuring that the economic levers of their continent rest firmly in their hands.
Muchadura Dube is a farmer and political analyst from Nyanga.
Source: http://www.manicapost.com/index.php?option=com_content&view=article&id=29265:free-trade-area-panacea-to-africas-economic-woes&catid=39:opinion-a-analysis&Itemid=132#.Us-YxfQW2a8
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Despite legal attacks, conflict minerals ban gets stronger
Major manufacturing and business groups on Tuesday urged a court here to roll back a new U.S. regulation that would soon require major manufacturers to ensure that their global supply chains are free of minerals used to fund violence in the Great Lakes region of central Africa.
Yet the previous day, Intel, the major computer hardware manufacturer, announced the world’s first product formally dubbed free of such materials, stating that its microprocessors would no longer use “conflict minerals”. The announcement highlights trends that advocates of greater supply chain accountability say are already well underway, and which they suggest belie parts of the legal case against the rule.
“This provision has already catalysed reforms of the minerals trade in the Great Lakes region and has prompted both [U.S.] and Congolese companies to carry out supply chain due diligence and source minerals more responsibly,” Carly Oboth, an assistant policy advisor with Global Witness, a watchdog group, told IPS.
“According to consulting firm Claigan, in September 2013 2,946 companies were identified as having conflict minerals compliance programmes … Despite the appeal, many companies have already publically demonstrated the feasibility of the rule as they begin implementation to meet the May 31, 2014 reporting deadline.”
The U.S. Chamber of Commerce, the National Association of Manufacturers (NAM) and the Business Roundtable, all major lobby groups, say the new rules impose an undue financial burden on companies and infringe on constitutional guarantees of free speech. The groups say they are supportive of the aims of the regulation, known as Section 1502, but want significant tweaks and the inclusion of certain exemptions.
But supporters counter that the Securities and Exchange Committee (SEC), the country’s lead regulator of publicly listed companies, has already thoroughly weighed these issues.
“Generally we’ve been supportive of the SEC’s position and think they did extensive analysis before adopting the conflict minerals rule,” Julie Murray, an attorney currently acting as counsel for Amnesty International, a rights group that has joined the lawsuit in support of Section 1502, told IPS.
“The SEC received some 13,000 letters urging it to promptly adopt this rule, and we think the commission did an exhaustive job of looking at the issues – taking into account the concerns that were raised by these groups, and trying to make the rule cheaper and easier to comply with.”
The appeal follows a detailed and strongly worded legal decision in July that upheld Section 1502, which was mandated by Congress in 2010 but only finalised last year. As the regulation currently stands, by June large companies will need to certify the sourcing of a handful of minerals sourced from central Africa, while smaller companies will have a longer timetable.
In the appeal, a central issue in the court’s decision-making will be the estimates the SEC used to figure out the financial burden that Section 1502 would place on companies, upwards of four billion dollars in initial compliance costs followed by annual costs of 200-600 million dollars. Yet Murray suggests that companies will be able to bring these costs down as they learn how to comply with the new regulations.
“In general we think that it’s important that companies learn about the source of the materials they’re using – most consumers say they should know whether the materials they’re purchasing are responsible for rape, torture and murder in the DRC,” Murray says. “At the same time, this rule isn’t just about human rights, but also serves an important role in informing investors and consumers.”
On Tuesday, however, two of the three judges hearing the case appeared sceptical of several aspects of Section 1502. They raised concerns about the precedent that the regulation would set, the SEC’s capacity to create such a rule, and even the scope of the underlying law.
Conflict-free microprocessors
In 2009, the U.N. Security Council formally recognised that revenues from minerals extraction were strengthening multiple armed groups operating in eastern DRC. The electronics industry has been one of the most significant users of the minerals that have been singled out for scrutiny, which include tin, gold, tungsten and others.
Supporters of Section 1502 say that many businesses are showing strengthening interest in doing the work necessary to comply with the rule, both for brand and financial reasons. In this, Intel is widely seen as having made a uniquely serious effort to clean up its global supply chain.
“Two years ago, I told several colleagues that we needed a hard goal, a commitment to reasonably conclude that the metals used in our microprocessors are conflict-free,” Intel’s CEO, Brian Krzanich, said Monday. “We felt an obligation to implement changes in our supply chain to ensure that our business and our products were not inadvertently funding human atrocities in the Democratic Republic of the Congo.
(An Intel executive sits on the National Association of Manufacturers’ board and is thus technically a party to the current appeal. While a company spokesperson declined to comment on the case, on its website Intel notes that its “positions do not always align 100% with those of the industry and trade organizations to which we belong.”)
Intel called the achievement a “critical milestone”, while Krzanich said the it was “just a start. We will continue our audits and resolve issues that are found.” He also urged the rest of the electronics industry to follow suit.
Others say industry leadership from other sectors is equally important.
“Now that Intel has released the first conflict-free product, it’s time for other companies to do the same,” Sasha Lezhnev, a senior policy analyst with the Enough Project, an advocacy group here, told IPS. “Particularly for gold – it’s important for jewellers to take action, while aerospace companies also need to step up. This problem won’t be solved by just one company.”
Lezhnev recently returned from the DRC, and notes that Section 1502, despite having yet to come fully into force, has already played a “backbone” role in defunding armed groups in the eastern part of the country. Such groups, he says, are also far less present today in the mining areas.
“Smuggled minerals are now about a third of the price of the [certified] minerals, so the new price this rule helped to spur is offering a strong incentive to build up a conflict-free trade,” he says. “You’re seeing the disarmament of many armed groups … and while that is not only because of the new regulation, this rule is offering a strong incentive for them to not restart again.”
Source: http://www.ipsnews.net/2014/01/despite-legal-attacks-conflict-minerals-ban-gets-stronger/
Specialisation: An intuitively wrong approach
Some ideas are intuitive. Others sound so obvious after they are expressed that it is hard to deny their truth. They are powerful, because they have many non-obvious implications. They put one in a different frame of mind when looking at the world and deciding how to act on it.
One such idea is the notion that cities, regions and countries should specialise. Because they cannot be good at everything, they must concentrate on what they are best at – that is, on their comparative advantage. They should make a few things very well and exchange them for other goods that are made better elsewhere, thus exploiting the gains from trade.
But, while some ideas are intuitive or obvious, they can also be wrong and dangerous. As is often the case, it is not what one does not know but what one mistakenly thinks they know, that can hurt. And the idea that cities and countries actually do specialise and that, therefore, they should specialise, is one of those very wrong and dangerous ideas.
When an idea is both intuitively true and actually false, it is often because it is true on one level but not on the level at which it is being applied. Yes, people do specialise, and so they should. Everyone benefits from each of us becoming good at different things and exchanging our knowhow with others. It is not efficient for a dentist and a lawyer, for example, to be the same person.
But specialisation at an individual level actually leads to diversification at a higher level. It is precisely because individuals and firms specialise that cities and countries diversify.
Consider a rural medical facility and a major city hospital. The former probably has a single general practitioner who is able to provide a limited suite of services. In the latter, doctors specialise in different areas (oncology, cardiology, neurology and so on), which enables the hospital to offer a more diverse set of interventions. The specialisation of doctors leads to the diversification of hospital services.
The scale, at which the specialisation of individuals leads to diversification, is dependent on the city. Larger cities are more diversified than smaller cities. Among cities with similar populations, more diversified cities are richer than less diversified cities. They tend to grow faster and become even more diversified – not only because they have a larger internal market, but also because they are more diversified in terms of what they can sell to other cities and countries.
What is true at the level of cities is even more applicable at the level of states and countries. One way to understand this is to think of industries as stitching together complementary bits of knowhow, just as words are made by putting together letters.
With a greater diversity of letters, the variety of words that can be made increases, as does their length. Likewise, the more bits of knowhow that are available, the more industries can be supported and the greater their complexity can be.
Cities are the places where people who have specialised in different areas congregate, allowing industries to combine their knowhow. Rich cities are characterised by a more diverse set of skills that support a more diverse and complex set of industries – and thus provide more job opportunities to the different specialists.
In the process of development, cities, states and countries do not specialise; they diversify. They evolve from supporting a few simple industries to sustaining an increasingly diverse set of more complex industries.
Achieving this implies solving important coordination problems, because an industry that is new to a city will not find workers with industry experience or specialised suppliers. But policymakers can do a lot to solve these coordination problems.
This is why the idea that cities, states or countries should specialise in their current areas of comparative advantage is so dangerous. Focusing on the limited activities at which they currently excel would merely reduce the variety of capabilities – or “letters” – that they have. The challenge is not to pick a few winners among the existing industries, but rather to facilitate the emergence of more winners by broadening the business ecosystem and enabling it to nurture new activities.
This is all the more important today, because the globalisation of value chains is delocalising supplier-customer relations. Cities and countries would be ill-advised to focus on a few “clusters” and consolidate the value chains in their location, as is so often recommended. Instead, they should worry about being a node in many different value chains, which requires finding other industries that can use their existing capabilities if they were somehow expanded and adjusted to new needs.
Competition inevitably tends to winnow out the less efficient firms and industries. It is not the policymakers’ role to hasten their death. Their task is to identify productivity-enhancing interventions that can harness economies of agglomeration by adding new activities and productive capabilities, making the whole bigger than the sum of the parts.
Ricardo Hausmann is a professor of economics at Harvard University, United States, where he is also director of the centre for international development.
Source: http://addisfortune.net/columns/specialisation-an-intuitively-wrong-approach/
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Don’t rush into EAC Monetary Union – Lagarde
Visiting International Monetary Fund (IMF) Managing Director Christine Lagarde is now warning Kenya against rushing to implement the East African Community Monetary Union.
Speaking to a section of the private sector on Monday, the IMF boss said the EAC is not yet ready for the move and needed to address key issues before they unite their currencies.
Some of the challenges, she said, include the increasing non-tariff barriers, varying economies and different tax regimes in respective countries.
“As a member of the Monetary Union of Europe, I have to tell you that it is very exciting ambitious project, but one where as Aristotle would put it; hasten slowly. Don’t rush,” Lagarde said.
She said Kenya, being a strong advocate of the regional economic integration should guide the other EAC member states in ensuring that common blunders experienced by other unions are not be repeated.
President Uhuru Kenyatta is the current chairman of the East African Community.
“Make sure you learn from our mistakes and that the East African Monetary Union can even teach the Europeans how to do it right,” Lagarde emphasised.
The Monetary Union Protocol was signed last month by regional heads of states, kicking off plans to have a common currency for the bloc within 10 years.
But the IMF chief says the countries should first come up with proper and clear convergence criteria, drawn from lessons learnt in other unions.
“There are multiple experiences, whether it is European Monetary Union, the Caribbean Unions, the West African Unions and all other unions. There are mistakes, gaps, omissions that can be learnt from,” she said.
The single currency is aimed at enhancing trade in the East African region and also strengthen the integration.
“Regional integration has opened up new markets, supported the emergence of a middle class, and enabled domestic demand to become an engine of growth. The process must now be deepened,” she however acknowledged.
Meanwhile she urged Kenya to come up proper policies that will see smooth implementation of devolution which she said stands a big challenge of Kenya’s economy.
Lagarde came into the country on Sunday 5 on a three day visit to discussing relations between Kenya and the IMF through meetings with various stakeholders.
Businessman Chris Kirubi later described Lagarde’s position on the Monetary Union as timely advice.
“This is very timely advice from the IMF chief. A Monetary Union should be the last thing that Kenya gets into. We should not allow something that could be potentially divisive come in the way of integration,” Kirubi said on phone from Dubai.
Source: http://www.capitalfm.co.ke/business/2014/01/dont-rush-into-eac-monetary-union-lagarde/
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EAC drafts $83.6m blueprint to promote exports
The East African Community has drafted a new blueprint to guide its efforts to market the region as a single source of exports.
The EAC Export Promotion Strategy 2013-2017 is ready for implementation this year and has four pillars.
The blueprint is intended to enhance business synergies among the five partner states to develop EAC as a single source of goods and services.
The focus of the strategy will be promotion of the production of diversified and high value products from the partner states. This is expected to increase access to international markets for increased export growth and reducing cost of doing business in the region.
“This strategy is expected to transform and position the EAC at the global stage as a competitive and dynamic export-led region,” said EAC Secretary General Richard Sezibera.
Implementation of the proposed strategy will involve EAC Secretariat, donors, regional institutions, government departments and public sector and private sector organisations for a period of five years.
It’s estimated that successful implementation of the plan will require at least $83.6 million.
The draft has four crucial pillars, which are production, marketing, business environment and institutional capacity building.
The production pillar focuses on building of regional structures to encourage adoption of technologies and availing affordable finance to facilitate export diversification and development.
The marketing pillar emphasises the need to finalise strategic partner negotiations, enabling exporting firms to meet high value export markets and EAC trade promotion organisation, market penetration and cooperation in strategic sectors and markets.
The third pillar will see infrastructure development to increase competitiveness through reduction in cost of power, elimination of non tariff barriers, harmonising and strengthening of institutional regulatory frameworks to reduce cost of doing business within the EAC.
The fourth pillar will address institutional and capacity, where export promotion agencies in partner states are to be strengthened to effectively execute their mandate.
The review of the region’s exports and imports trends shows that EAC imports more than it exports to the rest of the world.
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Tripartite Free Trade Area to become a reality
Three regional economic communities in Africa are expected to sign an agreement in 2014 to establish an enlarged market covering 26 countries in eastern and southern Africa.
The “Grand” or Tripartite Free Trade Area (FTA) with a combined population of some 600 million people and a Gross Domestic Product of about US$1 trillion covers half of the member states of the African Union and is intended to boost intra-regional trade, increase investment and promote the development of cross-regional infrastructure.
The target was set just five years ago by the Common Market for Eastern and Southern Africa (COMESA), the East Africa Community (EAC) and the Southern African Development Community (SADC), commonly referred to as COMESA-EAC-SADC.
Since the historic Summit of Heads of State and Government in October 2008 in Kampala, Uganda, they have made significant progress towards realising this dream of opening up borders to literally half of the continent, spanning the entire southern and eastern regions of Africa – from Cape to Cairo.
The chairperson of the Tripartite Task Force, Dr Richard Sezibera, has indicated that negotiations are progressing according to the agreed time-frame, and that consultations will be concluded soon.
He said an agreement by the three regional communities will be signed by June 2014, paving the way for the launch of the FTA.
“Considerable progress has been made and negotiations have intensified to ensure that we clinch the Tripartite Free Trade Agreement by June 2014,” Dr Sezibera, who is also the EAC Secretary General, said at a tripartite meeting held in November in Arusha, in the United Republic of Tanzania.
His counterparts, Dr Stergomena of Tax of SADC and Dr Sindiso Ngwenya of COMESA, have pledged to make the tripartite negotiations a success.
The ongoing negotiations involving COMESA-EAC-SADC are being followed keenly by the AU as other regions that want to learn from this experience.
Africa’s long-standing vision since 1963 at the formation of the Organisation of African Unity (OAU), now the African Union, is to have a united and integrated region.
Under the African Economic Community Treaty signed in 1991, Africa aims to establish a continent-wide free trade area and these regional trade arrangements such as the Tripartite FTA are regarded as the building blocks.
Once operational, this tripartite FTA will become a new benchmark for deeper regional and continental integration in Africa.
There is a clear recognition that COMESA-EAC-SADC is founded on a strong and clear agenda, despite the challenges that the three regional communities may face.
According to a roadmap adopted in June 2011, negotiations for a Tripartite FTA are being conducted in three different phases – preparatory phase, phase one and phase two.
To date, the Tripartite Trade Negotiation Forum (TTNF) has completed the preparatory phase which involved the exchange of relevant information, including applied national tariffs and trade data and measures.
It was aimed at ensuring the adoption of the terms of reference and rules of procedure for the establishment of the TTNF. This phase began in December 2011 and lasted about 12 months.
The tripartite negotiations are now concluding phase one which will cover core FTA issues of tariff liberalisation, rules of origin, customs procedures and simplification of customs documentation, transit procedures, non-tariff barriers, trade remedies and other technical barriers to trade and dispute resolution.
Facilitating movement of business persons within the region is being negotiated in parallel with the first phase.
Phase two, the last stage of the negotiations, is expected to start soon and will cover trade in services and trade-related issues such as intellectual property rights, competition policy and trade development and competitiveness.
According to the roadmap, all negotiations should be completed within 36 months. Thereafter, COMESA-EAC-SADC are expected launch a single FTA by 2016, building on the FTAs that are already in place.
It will also resolve the long-standing conundrum of overlapping membership, which has presented barriers for the three communities in their quest towards integration.
Technically, a country cannot belong to more than one customs union, yet the three communities have either already established or are working towards creating their unions.
The ultimate launch of the enlarged FTA will result in the three sub-regions coalescing into a single FTA with the goal of establishing a single Customs Union in the near future.
With the launch of the “grand” FTA now getting closer to becoming a reality, countries in eastern and southern Africa including Zimbabwe should ensure that they fully benefit from such an arrangement.
The creation of an enlarged market would promote the movement of goods and services across borders, as well as allowing member countries to harmonise regional trade policies to promote equal competition.
Removal of trade barriers such as huge export and import fees would enable countries to increase their earnings, penetrate new markets and contribute towards their national development.
However, like any other trade arrangement, the Tripartite FTA will bring its own challenges that need to be addressed. For example, less prepared nations are at risk of being swallowed economically by more powerful nations, as their local industries would suffer from the stiff trade competition from more rival firms in an open market. This competition may subsequently allow the more organised and developed nations to push weaker local firms out of business.
Hence, member states must smartly address such pertinent issues to fully benefit from the trade arrangement.
One way of addressing this could be by boosting the manufacturing sector to ensure it is able to compete and withstand pressure from outside firms.
Another option is value-addition to increase benefit from natural resources such as gold, diamonds and nickel.
Zimbabwe has already identified various measures that aim at accelerating economic development and preparing its industries to withstand stiff competition in an open market.
These measures are contained in the newly crafted Zimbabwe Agenda for Sustainable Socio-Economic Transformation (ZimAsset). Zim Asset is a Government blueprint that will guide economic transformation and development in Zimbabwe for the next five years, spanning October 2013 to December 2018.
It should be noted this is the same period in which the Tripartite FTA involving COMESA-EAC-SADC is to be launched, thus ZimAsset is also an important blueprint for the country in this context.
ZimAsset has identified four key priority clusters that will enable Zimbabwe to achieve economic growth and reposition the country as one of the strongest economies in the region and Africa.
These key priority clusters are food security and nutrition, social services and poverty reduction, infrastructure and utilities, and value addition and beneficiation.
Value addition in various sectors, among them mining, agriculture, infrastructure focusing on power generation, transport, tourism, information communication technology and enhanced support for small to medium enterprises, are the key drivers of any economic agenda. sardc.net
SANF is produced by the Southern African Research and Documentation Centre (SARDC), which has monitored regional developments since 1985.
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“Bali is just the start” – Azevêdo
Director-General Roberto Azevêdo, in a speech at a diplomatic seminar in Lisbon on 6 January 2014, said: “The task of strengthening the multilateral system and moving towards delivering on the Doha Development Agenda will be difficult – but it is not impossible. Many didn’t believe we could deliver in Bali, and with good reason. But we did – and we can do more. Bali is just the start.” This is what he said:
I am delighted to be in Lisbon, and to have the chance to address such a distinguished audience here, in a place that is so symbolic of Portuguese democracy.
Of course, being Brazilian makes the pleasure even greater – speaking in Portuguese at an official event is a rare privilege, to say the least.
But the privilege also involves the chance to revisit a land which, aside from its mystique, is also a point of reference for all Brazilians. I can assure you all that, in my personal experience (as a Brazilian whose blood is 7/8 Portuguese), it is impossible to understand the Brazilian soul without visiting the roots and common origins of our people – people in the singular – distributed on both sides of the Atlantic.
Before embarking on the topic of our meeting here today, I feel compelled to share with the Portuguese nation my profound sadness and solidarity following the passing of Eusébio. As I think everyone knows, I’m a football fanatic, and it was very sad to receive the news when I disembarked yesterday in Lisbon. Eusébio – our “Black Panther” – was a sportsman and human being who always aroused feelings of admiration and inspired millions around the world. At least we have the consolation of being able to relive his great moments with images that will doubtless be relayed by television worldwide. He will remain forever in the annals of history as one of football’s giants.
To get back to the route map of our conversation, just over a year ago I announced my candidacy for the post of Director‑General; and I was here in Lisbon at the start of last year, still in the early stages of that selection process. What I saw and heard here encouraged me to pursue the position of Director‑General, and I’m very grateful for the guidance and wise advice that was offered to me. These last 12 months have been truly eventful and testing.
I want to thank the Portuguese Government for the tremendous support you gave me throughout my campaign for this role – and, particularly, for the support that you, along with the EU as a whole, gave to achieving a successful outcome in Bali.
My presence as the head of the WTO and the success of the Bali negotiations were a direct outcome of that support. We now need to build new negotiations and multilateral outcomes on the foundations which we have just jointly signed up to in Bali.
This new endeavour is precisely the topic of my talk this morning, which has the title “Trade multilateralism in the twenty‑first century.”
While today I can speak more optimistically about this topic, just six weeks ago that would not have been the case.
Before the gavel finally came down to confirm the adoption of the Bali Package, the future of trade multilateralism was in doubt.
But the gavel did come down on the deal – we delivered. And it has changed the outlook and the opportunities quite dramatically.
I remember that, just one week from the start of the Ministerial Conference in Bali, we closed the negotiating process in Geneva with texts that were still unfinished. We were a step away from another failure; and, in my opinion, only one factor could reverse that situation and bring us to a positive outcome in Indonesia.
To use a buzzword that is well‑known in diplomatic spheres, what was required was “political will”. In practical terms, what we really needed and the only thing capable of ensuring that that “political will” materialized, was a collective awareness that:
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the agreement being pursued was desirable for everyone and, above all, doable for everyone;
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a positive outcome would not produce winners and losers, nor a north‑south divide (both developed and developing countries would need to work for the agreement);
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the multilateral trading system needs to be reinvigorated to benefit everyone, particularly the smallest countries and those with least capacity to manage the intricacies of large‑scale trade negotiations.
In my opinion, the fact that this set of elements was present in Bali is what enabled dynamic and innovative procedures that led us to finalize the texts, without the traditional closed‑door negotiations with a small number of delegations around a single table. The process was inclusive and transparent to the last.
Clearly, aside from the systemic impact and its symbolic dimension, the Agreement was only possible on the basis of what was on the table. That had to be the starting point and the central underpinning of the “political will” we were looking for. In fact, the Bali Package involved a large number of measures that are very important for all Members. It covered three important areas, and I’ll take each one in turn.
The Bali Package
The first pillar is Agriculture. This is the cornerstone of the Doha Development Agenda which the WTO has been working on since 2001. Agricultural issues are very dear to developing countries, and the Bali Package delivered some important outcomes.
For example, it sets us on track for a reform of export subsidies and measures of similar effect, and it makes practical progress towards better implementation of the tariff quota commitments assumed in the Uruguay Round. There is also a reaffirmation and a deepening of the political commitments assumed in Hong Kong on trade liberalization and the reduction of distorting support to cotton – a very important issue for the African countries that grow that crop.
The Package also provides temporary protection for food security programs in developing countries, which allow for the stockpiling of grain for subsequent distribution to the poor. As we know, some of those countries could be exposed to legal challenges in the WTO for exceeding the limits stipulated in the Agriculture Agreement for certain types of domestic support. So, in addition to the temporary protection against legal challenges, the Bali Agreement states that a permanent solution will be negotiated and concluded before the 11th Ministerial Conference in four years’ time.
The second pillar of the Package is Development.
Here, a monitoring mechanism will provide for the review and strengthening of special and differential treatment provisions for developing countries, which are contained in all WTO multilateral texts. This achievement is vital for the equilibrium and efficacy of the multilateral system.
There are also a number of specific measures to support the Least-Developed Countries.
They include reforms that would enable services providers in LDCs to enjoy new export opportunities in developed country markets.
They also include steps to simplify rules of origin, which again will open up new export opportunities for those countries specifically.
Under this pillar we will also see improvements in trade preference arrangements which extend exemption from tariffs and quotas to LDC exports.
The third and final pillar is Trade Facilitation, which sets out to simplify and modernize customs procedures, and make them more transparent, thereby reducing transaction costs. The Agreement on Trade Facilitation will be able to provide a significant – and today much-needed – boost to the global economy, delivering growth and jobs. This could be worth up to $1 trillion per year to the global economy – generating up to 21 million jobs.
Significantly the Agreement also ensures the provision of technical assistance to support developing economies and the least–developed economies to implement these modernizing reforms, and therefore help them integrate better into global trade flows.
Clearly estimates can vary, but, once the Agreement is implemented, there could be an expansion in developing country exports of up to 10% – compared to a 4.5% expansion in developed countries.
It is true that the deal represents only part of the Doha Development Agenda. But there can be no doubt that this is a significant package that will provide a considerable economic boost and improve the lives of millions of people around the world – particularly among the poorest and in countries whose economies have stalled and are suffering high levels of unemployment.
In the specific case of the European Union and its member States, the conclusion of the Bali Package reflects that grouping’s chief negotiating objectives. With the Agreement on Trade Facilitation, opportunities for expanding trade will clearly increase. The Agreement also offers potential to facilitate the internationalization of small and medium–sized enterprises, which are important drivers of job creation and income distribution in many European countries.
The importance of the Multilateral Trading System
But of course these outcomes do not fully reflect achievement of Bali.
There was a great deal more at stake.
I said at the start of the Bali Conference that the very future of multilateral trading system hung in the balance.
Ministers needed to be warned that the consequences of failure were very real for us all. And they responded positively, demonstrating the flexibility and political will needed to cross the finishing line. And by doing so they also clearly showed the importance that they attach to the system.
In recent months there has been a lot of talk about regional and bilateral agreements.
The Transatlantic Trade and Investment Partnership is one such potential agreement – and I know this is the subject of a panel session during today’s seminar. My view of this is the same as of other potential agreements of this kind: it is a positive initiative to be welcomed – but it can only ever be one part of the wider picture. Agreements such as this cannot be sufficient on their own to ensure globalizable gains. The proliferation of regulations and standards tends to multiply costs rather than reduce them.
As we all know, the multilateral trading system was never the only option for international trade negotiations. It has always co-existed with, and benefitted from, other initiatives – whether regional or bilateral. They are therefore not mutually exclusive alternatives.
The WTO disciplines also need to evolve to reduce the gap that will exist between multilateral regulations and the new generation regulations negotiated outside Geneva. The two processes, multilateral and bilateral, must move forward together to reduce costs effectively and to curb protectionism. Otherwise, we could see results that are exactly the opposite of what we are seeking.
Nor should we forget the systemic effects that will be felt if non–multilateral undertakings become the sole negotiating channel. We would then have a major problem both in terms of asymmetry of the agenda and the issues covered.
In such fora the Least–Developed Countries tend to lag behind or, worse still, get excluded from the negotiating table. Moreover, the agenda is inevitably limited and neglects issues that are critical for the global trade agenda such as agricultural subsidies.
In addition, many of the deals that are currently being discussed ignore the most important and dynamic frontier of international trade: the big emerging players.
The emergence of these new players is one of the central facets of the evolution currently taking place in global trade and global governance mechanisms.
And the multilateral trading system assumes even more critical importance given the fragility of growth in the global economy. Economic conditions have generated protectionist pressures in some areas.
Our most recent trade report for the G-20, published in December, found that trade restrictions are on the rise, with 116 new trade restricting measures being identified over the preceding six months.
Furthermore, the global economy is evolving rapidly and dramatically in other key areas, such as:
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shifts in trade patterns (South-South trade, for example, is growing at unprecedented rates);
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shifts in production and consumer behaviour (private sector standards and concerns with impacts on climate, environment, human health, etc);
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ongoing technological innovation; and
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the further internationalization of supply chains (cross-border aspects tend to intensify as transport and communications become faster).
Both trade and the international economy are evolving – and the multilateral system is the only system that can truly and adequately respond to the challenges that are appearing on several fronts. So we need to consider how it can continue to deliver in the years ahead.
Lessons from Bali
I believe the Bali package provides some useful lessons to this end – not just through the substance and the strong reaffirmation of Ministers’ commitment to the Doha Development Agenda – but also through the procedures we adopted which led us to success in Bali.
First, we needed to be creative. We knew that, in the short run, we were not in a position to conclude the Doha Round in full and by the route we had been pursuing – that much was acknowledged at the 8th Ministerial Conference held in Geneva in 2011. A reality check enabled us to look at areas that were promising and doable; and this enabled us to design the general outline of what would emerge as the “Bali Package”.
Second, an important point is that the process had to be transparent and inclusive at all stages. Instead of small groups of countries negotiating in closed rooms, the entire membership came together to negotiate in open-ended meetings. It was not an exclusive club that was deciding everything.
Where smaller meetings were held, the attendees varied according to the issue. What mattered was not the size of the country but the degree of sensitivity on the issue in question. The results of those smaller-scope conversations were immediately taken to the broader group of Members. Although it was a slow and painstaking process, it was essential to give all Members ownership of the package and the outcomes.
Lastly, we sought a balanced package that everyone could support. The traditional divide between developed and developing countries, between north and south, was not present in this package.
Clearly, perceptions frequently differed on the various issues, but all parties perceived gains when the package was viewed as a whole.
The developing nations fought for the package just as hard as anyone. The few voices that expressed reservations about the general balance of the agreement and suggested it should be rejected found no echo in the developing world. Bali changed the ballgame – we have put the ”World” back into the “World Trade Organization”.
Post-Bali
We now need a ministerial mandate to look anew at core Doha Round issues and to develop a viable new approach. I think these lessons will help us make further progress.
I listened very carefully to Ministers on this topic in Bali; and a number of suggestions were floated there. Although they vary widely in content and emphasis, all need to be considered carefully and discussed among Members.
Nonetheless, certain elements seem to be essential for our future work, whatever path we follow, and I will now make a brief and non-exhaustive list of them.
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We must be ready to be creative and keep an open mind to new ideas. We need to be prepared to recognize the most urgent challenges and priorities of the modern world, without ignoring the negotiating mandates.
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We cannot forget that development has to be preserved as the central pillar of our efforts.
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We need to explore new ways of making headway on the most difficult negotiating topics. We might even conclude that there are no prospects for progress in those areas, and that we need to seek other negotiating paths. But we musn’t be afraid of that discussion or shy away from it.
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We need to be realistic. One of the critical factors for success in Bali was respect for the limits of political viability when defining the negotiating targets.
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Our efforts need to be given a sense of urgency. Rapid changes are taking place in the world, in the business, political and cultural domains. The trade agenda is no longer confined to tariff reduction. Today the regulatory dimension, particularly within national territory, is just as important as what happens strictly on the border, or even more so. The system cannot take two or three decades to respond to those changes; it needs to act much more swiftly.
Conclusion
The task of strengthening the multilateral system and moving towards delivering on the DDA will be difficult – but it is not impossible.
Many didn’t believe we could deliver in Bali, and with good reason. But we did – and we can do more. Bali is just the start.
As I said at the beginning of my remarks, just six weeks ago the fate of the multilateral trading system hung in the balance. Today we can talk with confidence about how we can continue to develop and strengthen the system for the future.
And when we look to the future, I think it’s also useful to look to the past.
We should recall the reasons why the GATT was created, leading to the WTO as we know it today.
The birth of the GATT was intimately associated with post–war ideals. A lasting peace would only be possible with balanced and fair global economic growth, without winners and losers. International political cooperation was imperative, clearly associated with closer and more objective international economic cooperation. The peaceful and cooperative integration of peoples thus depended on greater integration and cooperation among countries in international trade.
Clearly, countries will not sacrifice their national interests for the multilateral system, nor could we ask them to do so. Nonetheless, the WTO cannot lose sight of those fundamental principles. There is plenty of room for convergence between defending national interests and improving the multilateral trading system.
I think I’ve talked for long enough. I know I’ve not identified the road ahead, but I hope I’ve given food for thought. We will need creativity and open minds in Geneva.
Portugal, as a tireless partner of multilateralism, with its efficient and highly reputed diplomatic corps and its aptitude for brokering understanding in international fora, has much to contribute to our joint reflection.
In my Cabinet, I receive close and always very wise counsel from Ambassador Graça Andresen Guimarães, and I’m grateful to the Portuguese Government for providing me with such indispensable support.
To conclude, let me once again thank the Portuguese Government, through the Minister of State and Foreign Affairs, for inviting me to address this distinguished assembly. I hope the work of this two-day seminar will be useful and fruitful.