December 2005, id21 insights #59

Harnessing trade for development

Benefiting from market access opportunities

Developing countries cannot achieve sustainable growth and poverty reduction unless they integrate into the world economy. Trade reforms are necessary, but not enough to maximise the potential benefits of trade. Negotiations at the WTO Ministerial Conference in Hong Kong in December, 2005 should also focus on establishing an 'aid for trade' mechanism.

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Other articles in this issue:

Getting to know the WTO

The General Agreement on Tariffs and Trade (GATT) regulating trade in goods came into force in 1948 with 23 signatories, of which 12 were developing countries. Conceived as a temporary agreement, the intention was for GATT to be overseen by a broader United Nations agency, the International Trade Organization (ITO), which would be responsible for the rules of world trade and international investment. However, the proposed ITO lacked the political support of the United States, thus leaving GATT as the real basis of the post-war trading system.

Doha negotiations

Focusing on the larger picture

Pascal Lamy, the new Director-General of the World Trade Organization, clearly laid out the agenda for the December 2005, Hong Kong Ministerial Conference. He emphasised that Hong Kong should be 'two thirds of the way' to completing the round of negotiations by the end of 2006. However, are negotiators approaching the right issues in the right way? Or has the process become too complex?

Market access or subsidies

What matters most?

The Doha negotiating agenda is complex, comprising traditional tariffs, non-tariff barriers, trade and investment in services, agricultural subsidies and World Trade Organization (WTO) rules.

Trade preferences

Do they work and who gains?

'Preferences' have been a feature of the trading system since the 1960s. While some authors argue that preferences do not work, research shows they work in cases where they confer a significant competitive advantage on countries that are reasonably efficient sources of supply.

Complementary reforms needed for poverty reduction

Whether trade liberalisation is a vehicle for poverty alleviation in developing countries remains contentious. Whilst free-trade advocates highlight the benefits of new export opportunities, its critics emphasise unfair competition from developed countries due to agricultural subsidies and non-tariff barriers, such as standards. Whatever the outcome of the Doha Round, on its own the round cannot do much to reduce poverty.

Aid for trade

Enhancing trade capacity in poor countries

Free access to markets will benefit developing countries as a group. Some large developing countries such as Brazil, China and India have the capacity to exploit opportunities arising from global trade reforms. However, the poorest countries may not gain much even from an ambitious Doha Round. Improving trade integration of poor countries could accelerate growth and poverty reduction.

Implementing WTO agreements

Lessons from Latin America

As developing countries gradually started to implement the commitments negotiated in the Uruguay Round Agreements (URA) after 1995, it became apparent that this was more difficult than expected. The net balance of gains and losses associated with implementation were quite unclear, if not negative.

Making trade negotiations work

The World Trade Organization (WTO) and many developing countries are engaged in regional integration efforts with neighbouring countries and with the major trading powers - the European Union (EU) and the United States (US).

Glossary

Useful web links

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