The New Partnership for Development: Linkages between NEPAD and WTO

By Economics Challenge

Introduction

Europe is in comparison to many areas of the world economy relatively homogeneous and integrated. This state is not only the consequence of geographical, historical and political factors, but also of the relatively long and stable development of regionalism in this region. 

Regionalism as a process in the formation of regional integration in the world economy began at the beginning of the 20th century. In its development we can distinguish three stages during which the motives, principles and tools of the integration considerably differed.

The major motive of the first stage (in the 1930s and 1940s) was not the pursuit of economic efficiency but the geopolitical expansionism.

But even at that time, the first new agreements that came into existence were based on economic incentives and led to the liberalization of economic relations. The BENELUX can be considered as the most significant representative of such an economic union. During the second stage, there were already overwhelming economic incentives towards regionalism. Due to this, there was a continuous growth in the number of regional agreements which gradually increased the strength of regionalism as the dominating tendency in the world economy. The most significant example of that stage is no doubt the development of the European integration process which was initiated by the establishment of a sectoral integration; from this stage the present EU evolved. The origin of the considerable integration process on the European continent triggered a strong response in the entire world economy and became an important model for the establishment of further regional integration in the world economy.

The third stage from the 1990s onward hit the whole world economy at an unprecedented pace and led to a boom of new types of regional agreements. Moreover, it was characterized by a general change in approach to regional economic integration. Due to the fact that the regionalism of the third wave differs so much from the previous stages, a new term for it was created in the vocational literature New Regionalism.

The example of the European Union as an economically successful trade agreement and peaceful political arrangement has much to offer the world. Whilst the EU is the product of a unique political and economic landscape, other Regional Trade Agreements (RTAs) also have the potential to build peace and prosperity.

Over the last fifteen years Regional Trade Agreements have become defining features of the modern economy and a powerful force for globalization. By the beginning of 2005 more than 250 RTAs had been notified to the World Trade Organization (WTO).

The debate on RTAs has tended to revolve around the somewhat narrow topic of what the trend means for multilateral trade liberalization; whether RTAs are a “stumbling block” or a “stepping stone” to multilateralism.

A dialogue between NEPAD and the WTO was initiated on 1 July 2002 when the Head of the New Partnership for Africa’s Development (NEPAD) Secretariat briefed the 41st Session of the Committee on Trade and Development. The WTO can support and does support some of NEPAD’s objectives, particularly through its technical assistance activities for African countries.

WTO in Brief:

Following World War II, nations throughout the world, led by the United States and several other developed countries, sought to establish an open and nondiscriminatory trading system with the goal of raising the economic well-being of all countries. Aware of the role of trade barriers in contributing to the economic depression in the 1930s, the countries that met to discuss the new trading system considered open trade as essential for economic stability and peace.

The intent of these negotiators was to establish an International Trade

Organization, which would address not only trade barriers but other issues indirectly related to trade, including employment, investment, restrictive business practices, and commodity agreements. Unable to secure approval of such a comprehensive agreement, however, they reached a provisional agreement on tariffs and trade rules, called the General Agreement on Tariffs and Trade (GATT). The GATT went into effect in 1948. This provisional GATT became the principal set of rules governing international trade for the next 47 years.

The World Trade Organization (WTO) succeeded the GATT in 1995. It was established as a result of the Uruguay Round of multilateral trade negotiations that were held under GATT auspices. The WTO encompassed the former GATT agreements with newly negotiated reforms, new trade issues such as services and trade-related intellectual property, a stronger dispute resolution procedure, a mechanism to review members’ trade policies regularly, and other duties. In contrast to the GATT, the WTO was created as a permanent structure.

The WTO has three broad functions:

First, the governments of the member countries agree on a set of multilateral rules and principles for trade, which provide a stable and predictable basis for trade. The economic effects of agreed-on rules and principles are difficult to quantify precisely, but are likely substantial and attractive to countries, since membership in the GATT/WTO has grown from 23 countries in 1948 to 148 countries at present (with about 30 more countries waiting to join).

The second function of the WTO is to provide a mechanism to enforce the rules. The dispute settlement procedure provides a way in which disagreements among countries over the interpretation of the rules can be resolved. Broadly, a country with a complaint requests a consultation and, if the dispute is not resolved during the consultation, the complaining country may request establishment of a panel. After the panel issues its decision, both disputing parties have the right to appeal. After the conclusion of all such proceedings, the Dispute Settlement Body (representatives of all the WTO members) adopts the report or reports, unless it decides by consensus to reject them.

Third, the WTO provides a forum for negotiations to reduce trade barriers.

Countries meet periodically in “rounds” to consider changes in rules on trade barriers. In the first five rounds (late 1940s to early 1960s), negotiations focused on reducing tariffs, which are now low. As tariffs were reduced, countries sometimes turned to non-tariff barriers (for example, subsidies, government procurement regulations, antidumping procedures) to restrict imports. Negotiations since the mid-1960s have covered non-tariff barriers as well. Today, negotiations might extend to measures that involve what once were exclusively domestic policy issues, such as health, safety, or environmental standards. Some WTO rules have been agreed on to prevent countries from using such standards as disguised protectionism, although each country retains the right to set its own standards.

Decisions within the WTO are made by member countries, not by WTO staff, and they are made by consensus, not by formal vote. The highest level body in the WTO is the Ministerial Conference, which is the body of political representatives (trade ministers) from each member country. The body that oversees the day-to-day operations of the WTO is the General Council, which consists of a representative from each member country. Many other councils and committees deal with particular issues, and members of these bodies are also national representatives.

Linkages between NEPAD and the WTO:

In recent years there has been an unprecedented amount of new activities that are aimed at fast-tracking African development and obtaining an improved position for Africa in the international community. It is perhaps no exaggeration to say that the main driving force behind this thrust is The New Partnership for Africa’s Development (NEPAD), a programme of the African Union (AU) that has developed into a process that become internationally recognized as the primary framework for African development since its inception in 2001. The NEPAD has endorsed an improved position for Africa’s international trade as a priority and has poverty reduction among its chief objectives. It is therefore fairly obvious that there are linkages between NEPAD and the World Trading Organization (WTO), and that this has special relevance for poverty alleviation in Africa. The relevance of this linkage is heightened as the NEPAD process is currently taking place in parallel with a Round of negotiations of the World Trade Organization (WTO) that is supposed to specifically deliver improved conditions of trade to better support global development.

In such a consideration of the NEPAD-WTO relationship it is important to outline the nature of NEPAD in order to better understand its positioning vis-à-vis the WTO. In doing this one can note that the NEPAD process is largely founded on the concept of various series of supportive forms of collaboration or partnerships, both intra-African and those between Africa and the international community, but remains a process that is “African owned” and “African driven”.

These are among the key principles of NEPAD with others including:

• Good Governance;
• Partnership between and among African peoples;
• An international partnership that changes the current unequal relationship between Africa and the rest of the world;
• Building African competitiveness;
• Accelerated regional and continental integration; and
• Ensuring all NEPAD partnerships are linked to the Millennium Development Goals (MDGs).

Trade is often stressed as a key dimension to many specific NEPAD programmes and objectives and here again agriculture is a case in point. Improved market access for African agricultural exports is a specific part of NEPAD’s Comprehensive Africa Agriculture Development Programme (CAADP). It is seen as being of pivotal importance for NEPAD objectives generally and especially given the strong growth expected in rural areas that should result from expanded agri-trade. This intended up-liftment in rural life driven by improved agricultural output, largely led by improved agricultural exports that the WTO context can facilitate, on a sustainable basis will naturally have the relief of poverty/hunger reduction, at its very core.

Trade in agriculture is usually a sensitive issue for most countries including the developed economies of the European Union (EU), USA and Japan, all of which are of pivotal importance in the global economy and its trade flows. These countries give substantial subsidies to their local farming communities and subsidize their agricultural exports; factors that help undermine Africa’s need to boost its agricultural sector and agri-trade. In addition these countries usually impose complex and strict requirements for food imports that most African countries have difficulties to comply with, and are in addition are often perceived to be imposing various other difficult hurdles for any agricultural imports from Africa and other developing countries.

All of this has a dramatic effect on hampering African agriculture from reaching the goals of NEPAD, especially if one considers the developed economic infrastructure existing in these countries that further supports their agriculture.

It is the WTO context that is of paramount importance to Africa in trying to rectify this situation. To quote the CAADP,” Expenditure on agricultural subsidies for the few in developed countries dwarf official development assistance for many countries in Africa, and the negative impact on the poor is quite clear.”

While these issues can be sorted out in regional frameworks such as Southern African Development Community (SADC) and the Common

Market for Eastern and Southern Africa (COMESA), they are special cases that certainly complicate the ongoing arrangement of intra-African trade and the formal trade relationship between Africa and the international community. This in turn has implications for the implementation of NEPAD and its benefits for poverty alleviation especially through the beneficial effects flowing from trade. They again stress the important linkages between NEPAD the WTO.

The WTO also has economic development as one of its stated primary objectives and WTO activities include providing technical assistance and capacity building for developing countries inter alias to assist them to better access possible benefits from the WTO context. As such the objectives of the WTO in respect of the strengthening and liberalization of world trade, together with its spin-off intended results that especially target development, makes it fairly obvious that there is a direct link between the WTO and implementation of the goals of NEPAD.

In both cases the alleviation of poverty is a key objective with the NEPAD context helping give an extremely relevant African focus for the results of the work of the WTO, and a key mechanism for the improved mobilization of activities to produce the results intended.

Recent events in both NEPAD implementation and WTO activities give particular cause to focus on these close linkages between the WTO and NEPAD, and flowing from this the manner in which this can be down-loaded onto poverty alleviation in Africa. These events include:

• The increasing focused attention of NEPAD on the use of strengthened business and trade for its implementation;
• The emphasis promoted in NEPAD on building regional integration in Africa and the need for resulting regional trade to be a driving force in this process;
• The increasing realization in the NEPAD context that Africa needs an improved business-enabling context, i.e. also referred to as the investment-enabling climate, to achieve NEPAD objectives, and that this is directly related to good regulatory frameworks for trade;
• The growth of economic sophistication in Africa being promoted by NEPAD that have new needs in the international trading regulatory arena;
• The new spurt in international interest in assisting development in Africa generally but now with a linked interest in doing this through market forces and especially trade;
• The Doha Round of WTO negotiations, i.e. the so-called Doha Developmental Round (DDR);
• The need for Africa to obtain improved coordination between its intra-African trade arrangements and those between both African countries and regions, and the broader international community where the WTO is of paramount relevance; and
• The pressing need for progress both in NEPAD as well as in the DDR, this being placed in turn by many in the broader international context of the new emerging relationship between various blocs of countries and the shape of such a community both with regard to broad structured formats as the WTO and the UN, but also with regard to regional entities.

Across the entire NEPAD-WTO relationship one can note that a key aspect of the nature of NEPAD is the notion of a supportive international partnership on which NEPAD rests. In this dimension the WTO as a leading global multilateral entity can be regarded as a key partner of NEPAD. In addition the various partnerships between NEPAD and the member states of the WTO, bilaterally or in collective formats, are all constituents of this WTO-NEPAD relationship.

REFERENCES

Adlung, R. and M. Roy (2005) ‘Turning Hills into Mountains? Current Commitments under the GATS and Prospects for Change’, Journal of World Trade, Vol. 39, No. 6, pp. 1161-1194.

Bailey, Robert (2005) ‘Basel II and Development Countries: Understanding the Implications’, Working Paper No. 05-71, Development Studies Institute: London.

Clarke, George, Cull, Robert, Martinez Peria, Maria Soledad, and Sanchez, Susana M. (2002) “Foreign Bank Entry: Experience, Implications for Developing Countries, and Agenda for Further Research”, background paper for the World Development Report 2002: Institutions for Markets, The World Bank, June 2002.

Feketekuty, G. (2000) ‘Assessing and Improving the Structure of the GATS’, in Pierre Sauve and Robert Stern (eds.), GATS 2000: New Directions in Services Trade Liberalization, Washington, D.C.: Brookings Institutions.

Hamilton, Paul and TeleGeography (2004) ‘Identifying Key Regulatory and Policy Issues to Ensure Open Access to Regional Backbone Infrastructure Initiatives in Africa’, ICI Policy and Regulatory Study – Africa, Global Information Communication and Technologies Policy Division, World Bank: Washington.

Ulrich, H. (2004) ‘Comparing EU Free Trade Agreements: Services’, In Brief no.6C, Brussels: European Centre for Development Policy Management.

WTO (2003) Trade Policy Review: Southern African Customs Union, Geneva: World Trade Organization.

WTO (2004), World Trade Report 2004, Geneva: World Trade Organization.

WORLD TRADE ORGANIZATION (WTO) Support to NEPAD: Period of report: 2002 – 2004

WORLD TRADE ORGANISATION (WTO) Support to NEPAD: Period of Report: 2004 – 2005

John H. E. Maré: NEPAD and the Worl                          d Trade Organization (WTO): A review of Related Implications for Poverty Reduction in the SADC Region in the Wake of the WTO Ministerial Conference in Hong Kong, December 2005.

Jimi O. Adesina: NEPAD and the challenge of Africa’s Development:    towards a political economy of a discourse, December 2002.

SOURCE: http://www.masseconomiced.org/the-new-partnership-for-development-linkages-between-nepad-and-wto.html