Not much in his first term at least! The last 26 days can give a clue on what he is likely to focus on as his priorities.
Jumpstarting the American economy, restoring its dynamism as the most competitive economy in the world and central to this will be averting the shrinking industrial jobs and creating new ones, funding for innovative technologies, managing the federal budget deficit, tax cuts for middle class families, reducing foreign energy dependency, re-innovating the education system.
On foreign policy front as a priority, he will be charged with rebalancing the war act in Iraq, Afghanistan and containing Iranian nuclear ambitions, save the long standing US-Middle East overall foreign policy agenda.
He will also be charged with offering leadership to the rest of the world from the global economic crisis that was caused by recent failure of international financial system.
Like he is a historical president, he is possibly at the end of a historical era, the likely end of “free-market absolutism” on to the “post-free market era” that has picked up momentum since the financial crisis struck recently.
It’s now wide spread and accepted that markets especially financial markets should be regulated.
This is a full plate agenda for president Obama and it needs pragmatic and non-idealistic and well thought out solutions.
Is it all bleak for the African continent in the first term?
No. Not at all, the first generation African-American, first American black president, Obama has already delivered a “down payment” to the ordinary folks on the African continent’s expectation.
On 4th November 2008 he delivered- that with hope, discipline and persistent hard work, against any extraordinary oddity, we can change our world. We can overcome any challenge and prejudice.
He delivered a psychological boost for all downtrodden people and those perceived or truly oppressed around the world, that they can stop being hostages of their fears, stereotypes and oppressors and marginalizers. That- yes they can!
African leaders and African people, have no further excuses of continuing to blame their lack of progress on colonialism and slavery and external forces, Obama has demonstrated that it’s possible to break these chains of the past and stop being hostages to them.
In this piece, I argue and propose a 6 point programme for President Obama come 20th January 2009 as his opportunities but also challenges to bring change to what Leonard De Caprio calls the “God forsaken Continent”-Africa.
His first African foreign policy priority should be using American diplomatic machinery and might to reverse the trend of conflict on the continent. From Congo, Zimbabwe, Somalia, Ethiopia-Eritrea etc, coupled with nurturing and enhancing African own diplomatic power, he will have to use his “fierce urgency of now”.
First he should abandon the old fashioned “carrot and stick” foreign policy approach by lifting the ineffective economic sanctions that only hurt ordinary people and leave the oppressive regimes thriving and oppressing their own people further.
Second, he should bring the protagonist including other global powers with interest in these regional conflicts (for example China in case of Darfur) to the talking table using his and American moral authority, failure of protagonists to agree should be followed with what America did in Kosovo, stop the suffering of ordinary people by intervening militarily with American and allied forces but keen to avoid the Iraq style mess i.e. he has to engineer carefull interventions strategies.
Third, the HIV/AIDS, TB and Malaria crisis on the continent- he will urgently have to reverse Bush’s aid conditionality regarding HIV/AIDs which has previously focussed on ABC (Abstinence, Be faithful and Use Condoms).
Largely driven by socially conservative republicans this aid conditionality approach on human lives has proved ineffective especially in Uganda where the prevalence rate of HIV/AIDs has been reversed in recent years from declining to increasing.
The approach of ABC is out of touch with 21 century reality and should be abandoned by Obama presidency as a conditionality for funding HIV/AIDS programmes in Africa. He should further boost up the PAPFER and TB and Malaria support beyond Bush’s accomplishments if he is to make a difference.
Fourth, fighting poverty on the continent, President Obama intends to double foreign assistance to Africa from $25 billion to $50 billion, cancel debts of heavily indebted African countries etc.
This is will not change things at all. Foreign assistance with American interests at the heart as U.S. congress determines or its competitors like China shape aid priorities and programmes or for that case from any other country has proved ineffective than trade.
Africa now after sixty years of foreign aid and debt cancellation needs something else. It needs to trade and capacity to trade with the rest of the world. Take for instance, today American farm subsidies are in the range of $ 25 billion per year.
Sadly these huge subsidies go to huge commercial farmers and agribusiness companies with annual incomes above $ 200,000! Coupled with export subsidies these have kept small holders producers in Africa outside the world markets and their own home markets.
This is an acceptable for a man who came in the presidency with credentials of change, especially in this case in the eyes of poor and struggling African farmers trying to make ends meet.
This is his opportunity to change this global trade injustice perpetuated by big agro industrial interest groups in the OECD countries especially against poor farmers in the developing world and Africa in particular.
Take for instance the huge subsidies that go to the U.S. cotton industry to produce inefficiently hurts thousands and thousands of poor small cotton farmers in Benin, Burkina Faso, and Chad, Mali and Uganda and other African countries.
He has also to change American policy of providing food aid in kind if his agenda is to reduce poverty on the continent. Shipping corn, or other grain, cooking oil etc across the Atlantic Ocean to feed Africans in displaced camps when in the neighbouring villages, small holder producers are having grain rotting in their granaries because of lack of remunerating market prices as a result of these cheap shipments should not make economic sense to a man on a mission to eradicate poverty on this continent .
Obama presidency should change this to monetizing food aid so as to encourage local purchases of food aid which would change the economic plight of many African small holder producers as sources of income. America is the largest food aid provider in the world but sadly in kind. This should stop on African continent with Obama presidency.
He will need to continue and strengthen African Growth and Opportunities Act (AGOA), extend it beyond the current deadline of 2015, make it more predictable and permanent to be able to attract meaningful and lasting investment on the continent.
Firth, I strongly believe President Obama should strengthen AFRICOM the new pentagon African Command despite the hullabaloo it generated on the continent.
Its mandate can be restricted to the pentagon providing technical assistance to African forces for humanitarian aid, disaster and counter terrorism strategy including drug trafficking control.
Africa is still vulnerable to these vices and its forces need the pentagon’s technology and capacity to contain them as well as enhancing their peace keeping mission’s capabilities. AFRICOM should not be viewed as militarization of Africa-America relationship but an essential strategic partnership for peace and development on the continent.
Sixth, president Obama proposes a global fund for education, together with his Add Value to Agriculture Initiative and Global Energy and Environment Initiative (GEE) in Africa, this should primarily focus on overhauling the higher education system on the continent, emphasise strengthening research and development, delivering 21st technology and innovation at higher institutions of learning on the continent with intent to generate tailor made continent solutions rather that utilising foreign expertise.
There is no doubt; President Obama will be constrained on delivery of this change to the continent. The ongoing financial crisis, the enormous pressure to focus on domestic problems all will have a possible impact on aspects of his foreign policy agenda and foreign assistance in Africa.
Consequently his African cousins should be ready for disappointments and mistakes from President Obama, but his presidency is a remarkable historical moment for the continent.
Sunday, November 30, 2008
Friday, October 31, 2008
Will the Global Financial Crisis hit Ordinary Ugandans?
Recently, a financial crisis has sent shock waves across the globe especially amongst the rich world from the United States to United Kingdom and the rest of Continental Europe.
The nature of the crisis is extremely incomprehensible even to the experts. It begun with the busting of the housing bubble in the U.S. that led to large losses for assets backed mortgage payments.
The resulting losses have left many financial institutions around the rich world with too much debt and too little cash to provide the credit needed by companies, private enterprises and individual consumers.
Banks are short of cash (liquidity) to pay for their resulting bad debts as well as to lend to each other and their clients.
There is wide spread panic that the global financial system may collapse and it seems to only be getting worse day by day.
Will this crisis spread to reach poor nations like Uganda and hurt ordinary Ugandans?
Yes, most probable. There are seven channels through which this crisis could spread to hit Ugandan economy and hence an ordinary Ugandan:
First, Uganda has been earning a lot of foreign exchange in form of remittances from Ugandans working abroad including the famous “Nkuba Kyeyos”.
These earnings reached a record level of USD $ 1.4 billion in 2007/08 financial year, making remittances the major source of foreign exchange for the government, private investment capital and macroeconomic stability instrument in Uganda.
Remittances also have been sole source of survival for some families, from school fees, to supporting household food and medical expenses.
Steady flow of this cash from Ugandans abroad has also supported the property boom, from land to housing and construction industry in Uganda which is at its peak now.
Much of this money comes from countries that are currently experiencing the financial meltdown i.e. U.S., UK, and continental Europe. Companies struggling to survive in these countries are likely cut jobs to reduce their costs, and others are collapsing and losing business.
In such circumstances it’s the immigrant workers that get affected first, and this will lead to reduced cash inflow in Uganda in form of remittances.
Reduced foreign exchange inflows will hurt government on macroeconomic stability, reduced private investment will lead to slow down in the property boom and families that depended on remittances from their kin abroad for incomes will be hurt, if this crisis turns into a global economic recession.
Second, Uganda’s exports will be hurt. Uganda is a primary commodities exporter i.e. coffee, tea, fish, flowers. Whenever, there is an economic slow down-recession, commodity prices are the first to Plunge. Recent oil prices are an example.
Depressed commodity prices together with reduced global demand because of reduced cash for rich consumer’s pockets will squarely be felt by the ordinary Ugandans who are directly participating in producing these commodities for exports through their reduced incomes.
Thirdly, like in the 1930s when the world entered into an economic recession, rich nations responded by shutting their markets from other nations exports-protectionism will rise. Triggered by industrial activity slow down, loss of jobs and massive unemployment, protectionism against Uganda’s exports could lead to reduced foreign exchange earnings, reduced household incomes depending on these exports.
Fourthly, reduced aid to support government budget, out of Ugshs: 6.1429 trillion budgeted in the current financial year, Ugshs: 1.8786 trillion is external money, probably in form of grants, loans or foreign aid. This is 30 percent budget support.
A recession as a result of financial crisis could trigger disruptions in the aid flows that can severely hurt government development budget and scale down the poverty eradication programmes undermining the progress to achieve the UN millennium development goals (MDGs) by 2015.
Also a probable recession will hurt NGOs budgets working in service delivery and development work. Because these NGOs usually depend on charity foundations in the north which depend on stock markets to raise their finances, agencies like World Food Programme which specialises in delivery of food aid to people in displaced camps could see their budgets shrink and operations hurt severely.
Firth, tourism, with the likely holiday makers in Europe, U.S. cash trapped, hotels and travel agencies may see fall in bookings and cash inflows, and likely will cut their costs by shedding jobs.
With fall in tourist arrivals, there will be fall in foreign exchange earnings and fall in activity of travel agencies and hotels leading to fall in jobs and family incomes.
Sixth, foreign investment in Uganda is also likely to slow down and thus slow down economic activity.
With commodity prices plunging, foreign extractive industry investment faces uncertain future if the recession continues, that will affect the viability and feasibility of certain companies investing in Uganda in short term, which could lead to loss of job creation opportunities with this missed investments.
Seventh, reduced cash inflows of any form will gravitate the problems families and households are already experiencing from high food and energy prices.
Household budgets have expanded of recent because of high food and energy prices, and with liquidity squeeze will make this worse for these families.
Overall, despite the rapid economic growth Uganda has achieved in the last years, it’s still vulnerable to external shocks like the current global financial crisis.
The above are still very serious potential avenues in which this crisis can hurt Ugandan economy and ordinary Ugandans in particular. The government and policy makers in Kampala should stay on the watch rather than dismissing the crisis!
The nature of the crisis is extremely incomprehensible even to the experts. It begun with the busting of the housing bubble in the U.S. that led to large losses for assets backed mortgage payments.
The resulting losses have left many financial institutions around the rich world with too much debt and too little cash to provide the credit needed by companies, private enterprises and individual consumers.
Banks are short of cash (liquidity) to pay for their resulting bad debts as well as to lend to each other and their clients.
There is wide spread panic that the global financial system may collapse and it seems to only be getting worse day by day.
Will this crisis spread to reach poor nations like Uganda and hurt ordinary Ugandans?
Yes, most probable. There are seven channels through which this crisis could spread to hit Ugandan economy and hence an ordinary Ugandan:
First, Uganda has been earning a lot of foreign exchange in form of remittances from Ugandans working abroad including the famous “Nkuba Kyeyos”.
These earnings reached a record level of USD $ 1.4 billion in 2007/08 financial year, making remittances the major source of foreign exchange for the government, private investment capital and macroeconomic stability instrument in Uganda.
Remittances also have been sole source of survival for some families, from school fees, to supporting household food and medical expenses.
Steady flow of this cash from Ugandans abroad has also supported the property boom, from land to housing and construction industry in Uganda which is at its peak now.
Much of this money comes from countries that are currently experiencing the financial meltdown i.e. U.S., UK, and continental Europe. Companies struggling to survive in these countries are likely cut jobs to reduce their costs, and others are collapsing and losing business.
In such circumstances it’s the immigrant workers that get affected first, and this will lead to reduced cash inflow in Uganda in form of remittances.
Reduced foreign exchange inflows will hurt government on macroeconomic stability, reduced private investment will lead to slow down in the property boom and families that depended on remittances from their kin abroad for incomes will be hurt, if this crisis turns into a global economic recession.
Second, Uganda’s exports will be hurt. Uganda is a primary commodities exporter i.e. coffee, tea, fish, flowers. Whenever, there is an economic slow down-recession, commodity prices are the first to Plunge. Recent oil prices are an example.
Depressed commodity prices together with reduced global demand because of reduced cash for rich consumer’s pockets will squarely be felt by the ordinary Ugandans who are directly participating in producing these commodities for exports through their reduced incomes.
Thirdly, like in the 1930s when the world entered into an economic recession, rich nations responded by shutting their markets from other nations exports-protectionism will rise. Triggered by industrial activity slow down, loss of jobs and massive unemployment, protectionism against Uganda’s exports could lead to reduced foreign exchange earnings, reduced household incomes depending on these exports.
Fourthly, reduced aid to support government budget, out of Ugshs: 6.1429 trillion budgeted in the current financial year, Ugshs: 1.8786 trillion is external money, probably in form of grants, loans or foreign aid. This is 30 percent budget support.
A recession as a result of financial crisis could trigger disruptions in the aid flows that can severely hurt government development budget and scale down the poverty eradication programmes undermining the progress to achieve the UN millennium development goals (MDGs) by 2015.
Also a probable recession will hurt NGOs budgets working in service delivery and development work. Because these NGOs usually depend on charity foundations in the north which depend on stock markets to raise their finances, agencies like World Food Programme which specialises in delivery of food aid to people in displaced camps could see their budgets shrink and operations hurt severely.
Firth, tourism, with the likely holiday makers in Europe, U.S. cash trapped, hotels and travel agencies may see fall in bookings and cash inflows, and likely will cut their costs by shedding jobs.
With fall in tourist arrivals, there will be fall in foreign exchange earnings and fall in activity of travel agencies and hotels leading to fall in jobs and family incomes.
Sixth, foreign investment in Uganda is also likely to slow down and thus slow down economic activity.
With commodity prices plunging, foreign extractive industry investment faces uncertain future if the recession continues, that will affect the viability and feasibility of certain companies investing in Uganda in short term, which could lead to loss of job creation opportunities with this missed investments.
Seventh, reduced cash inflows of any form will gravitate the problems families and households are already experiencing from high food and energy prices.
Household budgets have expanded of recent because of high food and energy prices, and with liquidity squeeze will make this worse for these families.
Overall, despite the rapid economic growth Uganda has achieved in the last years, it’s still vulnerable to external shocks like the current global financial crisis.
The above are still very serious potential avenues in which this crisis can hurt Ugandan economy and ordinary Ugandans in particular. The government and policy makers in Kampala should stay on the watch rather than dismissing the crisis!
Wednesday, October 15, 2008
Economic growth is more than cash in people`s Pockets!!
I read with interest Dr. Augustus Nuwagaba’s opinion titled “Why Economic Growth Is Not Felt In People’s Pockets” which was published in the New Vision of September 15. Nuwagaba gave an inaccurate analysis.
First, he wrongly characterises economic growth as construction of roads, buildings, airports, and other public facilities! What he characterises as economic growth is physical infrastructure development, which is only an indirect productive capital that facilitates the production of goods and services in a country.
Economic growth is the increase in a country’s output of goods and services in a given period. The total value (in dollars or shillings) of these goods and services is called gross domestic product (GDP). It constitutes national income over that period and includes what everyone in the country earned including, the two kilogramme of cassava per household dried by women along Iganga-Tirinyi-Mbale road that Nuwagaba mentioned.
Secondly, Nuwagaba failed to link economic growth and development. The UNDP human development report of 1990 defined “human development” as a process of enlarging peoples choices and opportunities — being educated, enabling individuals to develop their full potential and lead productive and creative lives, having access and command of resources to live decent, healthy and longer lives.
Development reflects improvements in welfare and expansion of choices and opportunities. So why has Uganda’s 8.9% economic growth rate not translated into cash in people’s pockets? This question can be misleading!
The reported growth rates often reflect both monetary and non-monetary GDP growth. When women along Iganga-Tirinyi-Mbale road produce cassava and feed their families (many households in Uganda are net food producers and rare goats, chicken and pigs), this enhances welfare more than cash in the pockets.
producing food for family consumption is the non-monetary GDP. If each household sells the surplus cassava and receives cash, this household income is reflected in the total national income as monetary GDP. So an economic growth rate like 8.9% of this financial year reflects goods and services that were produced and consumed at home to produce family welfare and those goods that went to the market to be exchanged for cash into the pockets.
So apart from what is felt in the people’s pockets, can we find other indicators of economic growth in Uganda? Yes, in the last 10 years, primary health care has improved while illiteracy rates, infant mortality rates and maternal mortality rates have gone down. More Ugandans go to school, more Ugandans can read and write, and an average Ugandan owns more now and lives longer than he did 10-years-ago.
Uganda is one of the countries in Sub Saharan Africa that has gained seven years of life expectancy (at 50.4 now). These are changes that have occurred because of sustained rapid economic growth that broadens people’s choices than cash in the pocket.
Until recently (2005), Uganda was one of the Sub Saharan countries on the path likely to attain the UN Millennium Development Goals (MDGs) by 2015, but the recent global economic changes and probably changes in Uganda’s priorities that have derailed it from this path. So it is not correct to focus on economic growth analysis in terms of only income-poverty aspect.
There are reasons why Uganda’s high economic growth rate may not translate into accelerated poverty reduction and economic inclusiveness. For example, Uganda has one of the highest population growth rates in the world (3.24% annually) and the highest proportion of the young in its population (49.4 % under the age of 14).
These statistics have a negative impact on the income of individuals even if the economy is growing at impressive levels of above 8.9%. Furthermore, productivity in the agricultural sector, which is the largest employer, has lagged behind the high population growth rate. This brings about low incomes in the sector and employment opportunities are not being generated quickly enough to meet the growing demand of non-agricultural work by graduating Ugandans.
Uganda’s rate of growth has been largely driven by concentrated enclave of exports especially coffee, fish, tea, limited manufacturing and construction, transport and communications. These sectors have few linkages with the informal economy that defines an average Ugandan.
This leads to income inequality that is hindering poverty reduction in Uganda, as Nuwagaba rightly observed.
How can income poverty be reduced? Through the increased rate of economic growth, and increasing the share that goes to the poor. The more of this income increment is captured by the majority poor, the more efficient the country will be in converting growth into poverty reduction.
The Government must prioritise creation of an enabling environment for small scale agriculture, micro enterprises and informal sector — the sectors that the poor depend on for their livelihood. This is possible if the steps being taken under “Prosperity-for-All” are effectively implemented and the Government continues focus on infrastructure development, especially transport and energy — contrary to Nuwagaba’s view of “public goods model”.
The writer is a Trade and Development Specialist
based in Geneva
First, he wrongly characterises economic growth as construction of roads, buildings, airports, and other public facilities! What he characterises as economic growth is physical infrastructure development, which is only an indirect productive capital that facilitates the production of goods and services in a country.
Economic growth is the increase in a country’s output of goods and services in a given period. The total value (in dollars or shillings) of these goods and services is called gross domestic product (GDP). It constitutes national income over that period and includes what everyone in the country earned including, the two kilogramme of cassava per household dried by women along Iganga-Tirinyi-Mbale road that Nuwagaba mentioned.
Secondly, Nuwagaba failed to link economic growth and development. The UNDP human development report of 1990 defined “human development” as a process of enlarging peoples choices and opportunities — being educated, enabling individuals to develop their full potential and lead productive and creative lives, having access and command of resources to live decent, healthy and longer lives.
Development reflects improvements in welfare and expansion of choices and opportunities. So why has Uganda’s 8.9% economic growth rate not translated into cash in people’s pockets? This question can be misleading!
The reported growth rates often reflect both monetary and non-monetary GDP growth. When women along Iganga-Tirinyi-Mbale road produce cassava and feed their families (many households in Uganda are net food producers and rare goats, chicken and pigs), this enhances welfare more than cash in the pockets.
producing food for family consumption is the non-monetary GDP. If each household sells the surplus cassava and receives cash, this household income is reflected in the total national income as monetary GDP. So an economic growth rate like 8.9% of this financial year reflects goods and services that were produced and consumed at home to produce family welfare and those goods that went to the market to be exchanged for cash into the pockets.
So apart from what is felt in the people’s pockets, can we find other indicators of economic growth in Uganda? Yes, in the last 10 years, primary health care has improved while illiteracy rates, infant mortality rates and maternal mortality rates have gone down. More Ugandans go to school, more Ugandans can read and write, and an average Ugandan owns more now and lives longer than he did 10-years-ago.
Uganda is one of the countries in Sub Saharan Africa that has gained seven years of life expectancy (at 50.4 now). These are changes that have occurred because of sustained rapid economic growth that broadens people’s choices than cash in the pocket.
Until recently (2005), Uganda was one of the Sub Saharan countries on the path likely to attain the UN Millennium Development Goals (MDGs) by 2015, but the recent global economic changes and probably changes in Uganda’s priorities that have derailed it from this path. So it is not correct to focus on economic growth analysis in terms of only income-poverty aspect.
There are reasons why Uganda’s high economic growth rate may not translate into accelerated poverty reduction and economic inclusiveness. For example, Uganda has one of the highest population growth rates in the world (3.24% annually) and the highest proportion of the young in its population (49.4 % under the age of 14).
These statistics have a negative impact on the income of individuals even if the economy is growing at impressive levels of above 8.9%. Furthermore, productivity in the agricultural sector, which is the largest employer, has lagged behind the high population growth rate. This brings about low incomes in the sector and employment opportunities are not being generated quickly enough to meet the growing demand of non-agricultural work by graduating Ugandans.
Uganda’s rate of growth has been largely driven by concentrated enclave of exports especially coffee, fish, tea, limited manufacturing and construction, transport and communications. These sectors have few linkages with the informal economy that defines an average Ugandan.
This leads to income inequality that is hindering poverty reduction in Uganda, as Nuwagaba rightly observed.
How can income poverty be reduced? Through the increased rate of economic growth, and increasing the share that goes to the poor. The more of this income increment is captured by the majority poor, the more efficient the country will be in converting growth into poverty reduction.
The Government must prioritise creation of an enabling environment for small scale agriculture, micro enterprises and informal sector — the sectors that the poor depend on for their livelihood. This is possible if the steps being taken under “Prosperity-for-All” are effectively implemented and the Government continues focus on infrastructure development, especially transport and energy — contrary to Nuwagaba’s view of “public goods model”.
The writer is a Trade and Development Specialist
based in Geneva
Tuesday, September 9, 2008
Trade Power and Geopolitics Undermining the WTO?
In the last 60 years the United States has dominated the world scene. It has dominated commerce, pushed nations to open their markets, championed liberal democracy and achieved military supremacy over other nations.
It helped craft the international system, for instance, the General Agreement on Tariffs and Trade (GATT).
The U.S. has led industrial innovation, world industrial output (its economy has been 3 times larger than the 2nd largest economy-Japan and almost larger than the first 10 biggest economies in the world combined).
It has been the world’s largest exporter, housed the largest number of billionaires, biggest enterprises (7 out of 10 world biggest corporations are American), tallest skyscrapers and is still the most competitive economy in the world.
Every thing biggest, largest, tallest, and cutest and many other –ests came from America. After the fall of the Soviet Empire, American might has gone an unchallenged in the last two decades, but now the tide is changing.
Four months ago Zakaria Fareed, editor of Foreign Affairs and Newsweek, magazines published a book titled “The Post-American World-The Rise of the Rest” in which he asserted that America was not declining in global influence but everyone else was rising.
Probably there is no where else this assertion has been demonstrated recently more conspicuously than in the global trading system at the World Trade Organisation (WTO).
Late July, 2008 the Doha Round of trade negotiations failed for the fourth time in a row (every end of summer, every year in the last 4 years, the Doha Round collapses) since its launch in November 2001 in Doha Qatar. It was originally scheduled to end Dec. 31, 2004; this end is not in sight even in the near future according to some analysts.
Political and economic commentaries point to a range of issues as causing failure: that Doha Development Agenda (DDA) was an ambitious, broad agenda; that the “single undertaking” principle of WTO is problematic (which states-nothing is agreed until everything is agreed) in which all 153 politically and economically diverse member nations must agree on everything on the negotiating table to achieve consensus.
Agriculture reform in the rich world is the most fundamental of these! The club of rich nations liberalised their industrial tariffs (U.S., EU and Canada and Japan, average industrial tariffs are below 5 percent amongst themselves) and they do not perceive that the benefits to reforming their agricultural trade largely in favour of the developing world is worth the political costs in their domestic constituencies to bring convergence in DDA.
The July failure was blamed on U.S, China and India. The three disagreed over the Special Safeguard Measures (SSM). SSM are mechanisms intended to shield developing countries from having their economies unexpectedly flooded with subsidized agricultural imports. They allow a developing country to temporarily increase customs tariff in response to a surge in import volumes or a sharp decline in prices.
The U.S. favoured use of SSM only when agricultural imports surged above 40 percent in volume. India and China wanted the mechanism be triggered when imports rose by 10 percent to protect small poor farmers. The impasse between the three giants led the 10 days ministerial negotiations to collapse.
Analysts have pointed to a new reality and changing global economic equation to put the persistent DDA failure in perspective:
First, is that “the rich nations club” (U.S., EU, Japan, and Canada) are no longer able to “buy up” a few developing countries with special sops as has been the practice in the previous Rounds. The developing world led by India, China, Brazil and South Africa has remained united and refused to yield ground to powerful nations!
Second, since the launch of DDA, three things happened reinforcing the changing global economic equation: American global economic and political leadership has stumbled; China joined WTO (in 2001) and is on the match to becoming the world’s biggest exporter; and economic expansion in China (annual average of 10 %GDP growth), India (within 8%) Brazil (above 3 %) has been faster than any of the “traditional industrial powers”, many of which are now at the brink of recessions.
Thus the rise of the rest, is trimming economic and political influence of until recently a loner global hegemony and its allies.
Mr. Zakaria has put this in perspective, that America’s power is being confronted by the rapid economic rise of the giants:-China, India, Brazil and South Africa, given their size (total population of above 3 billion), “they will have a large footprint on the map of the future from industrial to financial (American financial system is in turmoil now) to social and to cultural”. And this is already visible in the global trading system. They are the new shakers and movers of the world economy and not the old club of G7!
WTO is also being hurt by bilateral and regional trade deals. These are largely anti-small economies like Africa economies and their development objectives. Many analysts believe this is what is happening with EPAs between EU and the ACP states. Regional pacts are pushing ahead at breathtaking speed; more than 100 deals came into force during DDA’s seven frustrating years.
The bigger economies will be able to achieve their ambitious mercantilist objectives of opening developing countries markets under PTA and RTAs without paying the liberalisation costs in agricultural sector than at WTO.
If the multilateral trading system is to remain relevant, at least three things must happen! (i) The rich nations must accept sharing leadership of the system with the emerging south. (ii) The global trade rules must be reformed and rebalanced and improved to serve all member states of the WTO, (iii) WTO must use its power to protect weak members against the might of the powerful in the regional and bilateral trade rules to promote development.
It helped craft the international system, for instance, the General Agreement on Tariffs and Trade (GATT).
The U.S. has led industrial innovation, world industrial output (its economy has been 3 times larger than the 2nd largest economy-Japan and almost larger than the first 10 biggest economies in the world combined).
It has been the world’s largest exporter, housed the largest number of billionaires, biggest enterprises (7 out of 10 world biggest corporations are American), tallest skyscrapers and is still the most competitive economy in the world.
Every thing biggest, largest, tallest, and cutest and many other –ests came from America. After the fall of the Soviet Empire, American might has gone an unchallenged in the last two decades, but now the tide is changing.
Four months ago Zakaria Fareed, editor of Foreign Affairs and Newsweek, magazines published a book titled “The Post-American World-The Rise of the Rest” in which he asserted that America was not declining in global influence but everyone else was rising.
Probably there is no where else this assertion has been demonstrated recently more conspicuously than in the global trading system at the World Trade Organisation (WTO).
Late July, 2008 the Doha Round of trade negotiations failed for the fourth time in a row (every end of summer, every year in the last 4 years, the Doha Round collapses) since its launch in November 2001 in Doha Qatar. It was originally scheduled to end Dec. 31, 2004; this end is not in sight even in the near future according to some analysts.
Political and economic commentaries point to a range of issues as causing failure: that Doha Development Agenda (DDA) was an ambitious, broad agenda; that the “single undertaking” principle of WTO is problematic (which states-nothing is agreed until everything is agreed) in which all 153 politically and economically diverse member nations must agree on everything on the negotiating table to achieve consensus.
Agriculture reform in the rich world is the most fundamental of these! The club of rich nations liberalised their industrial tariffs (U.S., EU and Canada and Japan, average industrial tariffs are below 5 percent amongst themselves) and they do not perceive that the benefits to reforming their agricultural trade largely in favour of the developing world is worth the political costs in their domestic constituencies to bring convergence in DDA.
The July failure was blamed on U.S, China and India. The three disagreed over the Special Safeguard Measures (SSM). SSM are mechanisms intended to shield developing countries from having their economies unexpectedly flooded with subsidized agricultural imports. They allow a developing country to temporarily increase customs tariff in response to a surge in import volumes or a sharp decline in prices.
The U.S. favoured use of SSM only when agricultural imports surged above 40 percent in volume. India and China wanted the mechanism be triggered when imports rose by 10 percent to protect small poor farmers. The impasse between the three giants led the 10 days ministerial negotiations to collapse.
Analysts have pointed to a new reality and changing global economic equation to put the persistent DDA failure in perspective:
First, is that “the rich nations club” (U.S., EU, Japan, and Canada) are no longer able to “buy up” a few developing countries with special sops as has been the practice in the previous Rounds. The developing world led by India, China, Brazil and South Africa has remained united and refused to yield ground to powerful nations!
Second, since the launch of DDA, three things happened reinforcing the changing global economic equation: American global economic and political leadership has stumbled; China joined WTO (in 2001) and is on the match to becoming the world’s biggest exporter; and economic expansion in China (annual average of 10 %GDP growth), India (within 8%) Brazil (above 3 %) has been faster than any of the “traditional industrial powers”, many of which are now at the brink of recessions.
Thus the rise of the rest, is trimming economic and political influence of until recently a loner global hegemony and its allies.
Mr. Zakaria has put this in perspective, that America’s power is being confronted by the rapid economic rise of the giants:-China, India, Brazil and South Africa, given their size (total population of above 3 billion), “they will have a large footprint on the map of the future from industrial to financial (American financial system is in turmoil now) to social and to cultural”. And this is already visible in the global trading system. They are the new shakers and movers of the world economy and not the old club of G7!
WTO is also being hurt by bilateral and regional trade deals. These are largely anti-small economies like Africa economies and their development objectives. Many analysts believe this is what is happening with EPAs between EU and the ACP states. Regional pacts are pushing ahead at breathtaking speed; more than 100 deals came into force during DDA’s seven frustrating years.
The bigger economies will be able to achieve their ambitious mercantilist objectives of opening developing countries markets under PTA and RTAs without paying the liberalisation costs in agricultural sector than at WTO.
If the multilateral trading system is to remain relevant, at least three things must happen! (i) The rich nations must accept sharing leadership of the system with the emerging south. (ii) The global trade rules must be reformed and rebalanced and improved to serve all member states of the WTO, (iii) WTO must use its power to protect weak members against the might of the powerful in the regional and bilateral trade rules to promote development.
Monday, July 28, 2008
Bananas could Derail the Doha Round
The news that EU reached a deal with the Latin American Countries (largely Costa Rica, Ecuador, Guatemala, Nicaragua Bolivia and Panama) on bananas has sparked anger from the African Caribbean and Pacific Countries (ACP). These countries (ACP) have long enjoyed preferences in the EU as one of their most important markets.
Today, 28/07/2008 as the DDA mini-ministerial negotiations in Geneva entered their second week, the ACP countries in solidarity and banana exporters particularly led by a West African Country of Cameroon expressed outrage and frustration on how the EU handled the issue on Bananas.
They are blaming the EU for shutting them out of the negotiations and reaching a deal with the Latinos that is going to severely affect their banana exports and affect millions of livelihoods in their countries. They warned this was not acceptable.
The ACP countries among other tropical products have long enjoyed preferences on their banana exports into the EU as their major banana market, largely linked to their historical trade relations with the EU characterised by the Lome Conventions and the Cotonou Partnership Agreement.
The EU currently applies a specific tariff of 176 Euros per tonne on bananas to non ACP suppliers. This tariff has always conferred the ACP country banana producers a comparative advantage over Latino producers.
It seems that the Latin American countries took advantage of the current intensified negotiations in the DDA and pressured the EU to cut its banana tariffs from 176 Euros to 109 Euros per tonne by 2014. This sharply contrasts a compromise deal that was proposed by Pascal Lamy the Director General of WTO. Mr. Lamy had proposed a final tariff of Euros 116 by 2015 as a middle ground which was rejected by the Latinos.
Mr. Lamy compromise proposal and the Latino deal means that the initial tariff cuts would be effectively implemented beginning January 2009. The Latinos have offered to concede on the legal part of the preferences on bananas with respect to peace clause as well as the 42 list of products( so called preference products) for which the ACP countries are seeking preservation of long standing preferences.
However, by this morning (28th July 2008) in an impromptu meeting convened by the Coordinator of the ACP Group, the Ambassador of Mauritius, the minister of Cameroon who is also the spokesperson of the ACP banana producing and exporting countries stated it categorically that its members were dissatisfied and were “not going to sign up to the Agriculture revised modalities” if the banana issue agreement does not address the minimum of their concerns.Thus blocking any possible Doha deal
The Ambassador of Mauritius indicated that the group had offered a counter proposal to the deal reached between EU and Latin American countries. In their package proposal the ACP countries are seeking among others (i) readjustment of proposed tariff cuts numbers (ii) measures to address revenue loss due to loss of export earnings from the deal i.e.the ACP wanted to be Compensated by the EU and (iii) EU to fund ACP structural adjustment programmes in ACP banana producing economies will be diversifying away from a single product of bananas which is being hurt by competition from the Latin American countries.
By the close of business today (Monday, 28 July), the ACP delegates were still in discussions but continued their threat that they will not be part of the consensus that wont address satisfactorily their concerns on bananas.
Today, 28/07/2008 as the DDA mini-ministerial negotiations in Geneva entered their second week, the ACP countries in solidarity and banana exporters particularly led by a West African Country of Cameroon expressed outrage and frustration on how the EU handled the issue on Bananas.
They are blaming the EU for shutting them out of the negotiations and reaching a deal with the Latinos that is going to severely affect their banana exports and affect millions of livelihoods in their countries. They warned this was not acceptable.
The ACP countries among other tropical products have long enjoyed preferences on their banana exports into the EU as their major banana market, largely linked to their historical trade relations with the EU characterised by the Lome Conventions and the Cotonou Partnership Agreement.
The EU currently applies a specific tariff of 176 Euros per tonne on bananas to non ACP suppliers. This tariff has always conferred the ACP country banana producers a comparative advantage over Latino producers.
It seems that the Latin American countries took advantage of the current intensified negotiations in the DDA and pressured the EU to cut its banana tariffs from 176 Euros to 109 Euros per tonne by 2014. This sharply contrasts a compromise deal that was proposed by Pascal Lamy the Director General of WTO. Mr. Lamy had proposed a final tariff of Euros 116 by 2015 as a middle ground which was rejected by the Latinos.
Mr. Lamy compromise proposal and the Latino deal means that the initial tariff cuts would be effectively implemented beginning January 2009. The Latinos have offered to concede on the legal part of the preferences on bananas with respect to peace clause as well as the 42 list of products( so called preference products) for which the ACP countries are seeking preservation of long standing preferences.
However, by this morning (28th July 2008) in an impromptu meeting convened by the Coordinator of the ACP Group, the Ambassador of Mauritius, the minister of Cameroon who is also the spokesperson of the ACP banana producing and exporting countries stated it categorically that its members were dissatisfied and were “not going to sign up to the Agriculture revised modalities” if the banana issue agreement does not address the minimum of their concerns.Thus blocking any possible Doha deal
The Ambassador of Mauritius indicated that the group had offered a counter proposal to the deal reached between EU and Latin American countries. In their package proposal the ACP countries are seeking among others (i) readjustment of proposed tariff cuts numbers (ii) measures to address revenue loss due to loss of export earnings from the deal i.e.the ACP wanted to be Compensated by the EU and (iii) EU to fund ACP structural adjustment programmes in ACP banana producing economies will be diversifying away from a single product of bananas which is being hurt by competition from the Latin American countries.
By the close of business today (Monday, 28 July), the ACP delegates were still in discussions but continued their threat that they will not be part of the consensus that wont address satisfactorily their concerns on bananas.
Thursday, July 24, 2008
The Multilateral Trading System Sails through Rough Waters in Geneva!!
Prof. Richard Baldwin at the Graduate Institute of International Studies in Geneva recently warned that the World Trade Organisation (WTO) is facing a threat of being irrelevant to the world trading nations if it "does not adopt to its challenges"! Like other international institutions namely the U.N.(and its largely ineffective Security Council) the IMF and the World Bank, it seems the bug of ineffectiveness is catching up with the newest of these international institutions-the World Trade Organisation (which was only born on January 1995)!
While Prof. Richard Baldwin, had in mind the threat of regionalism in which trading states have resorted in bypassing the WTO most favoured nation (MFN) liberalisation approach to regional or bilateral or unilateral liberalisation of global trade. He contends this would end up making WTO irrelevant as an institution charged with ensuring the rule based trading system! which is its strategic challenge, the immediate problem however (probably hard to adopt), is power, politics and the geopolitical positioning in its membership!
These challenges are not new though, many have not forgotten the Seattle debacle, when small and poor nations stood up to the rich nation`s bullying and arm twisting at the 3rd WTO ministerial conference that ended up collapsing without a trade treaty signed! similarly at the 5th ministerial meeting in Cancun Mexico that also collapsed without an agreement because of poor nations and developing countries standing up against the expanded agenda that brought on board the so called "Singapore or New Issues".
The poor nations had learned the lessons of using their numerical strength to rebalance the power of their rich counterparts through the coalitions (like the famous G90, G21, G33, G110 and many more Gs that evolved right on the run to the Cancun Ministerial meeting). More than 3/4 of the WTO membership are either Developing or Least Developed Countries!
The core of the problem is that its hard to imagine how its possible to reach an agreement based on consensus under "Single Undertaking" (nothing is agreed until everything is agreed) between very diverse 153 members of this organisation. You have categories ranging from the super Rich countries and blocks like the U.S.(together with NAFTA countries account for 8 percent of world trade), EU [31 percent of world trade (intra-trade) take place here], then Japan and China and other major East Asian Countries control regional trade of about 14 percent of global trade)and poor members for instance African intra-regional trade is hardly 0.5 percent of global trade (actually its only USD 33 billion making it only 0.3 percent of global traded merchandise- even though its the region with the largest membership in the WTO)
With this immense trade power imbalance, its difficult to have states agree amongst themselves on a deal that satisfies every body especially when some members come with mercantilist intentions to the negotiating table, even if one appealed to the moral conscience of the negotiators, definitions of what would be a moral trade deal would differ!
By yesterday, the Chairman of the Trade Negotiating Committee (TNC) who is also the WTO Director General Mr. Pascal Lamy had come face to face with this reality of power, politics and diversity of interests and suspended negotiations in the green room! the logic of calling few a key ministers in Geneva during this summer was to try to minimize friction between the key protagonists, bring the powerful players together to agree amongst themselves before they sell the deal to the wide membership expecting high chances of acceptability then!
This mode of negotiation was adopted in that it would allow afew ministers from key regional coalitions as Coordinators (For instance , currently the Deputy Prime Minister of Mauritius is coordinating the ACP group in the negotiations)to join the big powers in the green room and they would emerge out occassionally to brief their constituencies on the progress.
The model gathered almost 30 ministers and senior officials, together in the so called "Green Room" but the points of divergences were so divergent that Mr. Lamy informed yesterday`s informal Heads of Delegations (HOD) TNC that he was changing the mode of negotiations to even smaller groups of ministers over an issue and then he will reconvene everyone in a general membership as a formal TNC to ascend to the deal reached amongst these small groups of ministers! By the yesterday, G7 (your guess is right-U.S., EU, Brazil, India, China, Japan and the unusual suspect, Australia!) had emerged as the core negotiating group thats likely to salvage the Round!
But the problem is that other politically insignificant delegations and their ministers had started feeling frustrated and locked out of the process, many of which have left Geneva already! This threatens the consensus amongst the membership and even if the deal was to be reached by the G7 consensus is likely to be difficult to reach in these circumstances (Mauritius minister warned this morning in the ACP/ and G90 coordination meeting).
Poor countries` ministers are heard complaining in the corridors of the WTO about the lack of transparency and inclusiveness of the whole process and that they will be no way they will ascend to a deal they have not negotiated and does not meet their minimum demands from the Round! Things are bad and they seem only to get worse for the MTS!
I will follow the events from inside from now-keep your eye on this space!
While Prof. Richard Baldwin, had in mind the threat of regionalism in which trading states have resorted in bypassing the WTO most favoured nation (MFN) liberalisation approach to regional or bilateral or unilateral liberalisation of global trade. He contends this would end up making WTO irrelevant as an institution charged with ensuring the rule based trading system! which is its strategic challenge, the immediate problem however (probably hard to adopt), is power, politics and the geopolitical positioning in its membership!
These challenges are not new though, many have not forgotten the Seattle debacle, when small and poor nations stood up to the rich nation`s bullying and arm twisting at the 3rd WTO ministerial conference that ended up collapsing without a trade treaty signed! similarly at the 5th ministerial meeting in Cancun Mexico that also collapsed without an agreement because of poor nations and developing countries standing up against the expanded agenda that brought on board the so called "Singapore or New Issues".
The poor nations had learned the lessons of using their numerical strength to rebalance the power of their rich counterparts through the coalitions (like the famous G90, G21, G33, G110 and many more Gs that evolved right on the run to the Cancun Ministerial meeting). More than 3/4 of the WTO membership are either Developing or Least Developed Countries!
The core of the problem is that its hard to imagine how its possible to reach an agreement based on consensus under "Single Undertaking" (nothing is agreed until everything is agreed) between very diverse 153 members of this organisation. You have categories ranging from the super Rich countries and blocks like the U.S.(together with NAFTA countries account for 8 percent of world trade), EU [31 percent of world trade (intra-trade) take place here], then Japan and China and other major East Asian Countries control regional trade of about 14 percent of global trade)and poor members for instance African intra-regional trade is hardly 0.5 percent of global trade (actually its only USD 33 billion making it only 0.3 percent of global traded merchandise- even though its the region with the largest membership in the WTO)
With this immense trade power imbalance, its difficult to have states agree amongst themselves on a deal that satisfies every body especially when some members come with mercantilist intentions to the negotiating table, even if one appealed to the moral conscience of the negotiators, definitions of what would be a moral trade deal would differ!
By yesterday, the Chairman of the Trade Negotiating Committee (TNC) who is also the WTO Director General Mr. Pascal Lamy had come face to face with this reality of power, politics and diversity of interests and suspended negotiations in the green room! the logic of calling few a key ministers in Geneva during this summer was to try to minimize friction between the key protagonists, bring the powerful players together to agree amongst themselves before they sell the deal to the wide membership expecting high chances of acceptability then!
This mode of negotiation was adopted in that it would allow afew ministers from key regional coalitions as Coordinators (For instance , currently the Deputy Prime Minister of Mauritius is coordinating the ACP group in the negotiations)to join the big powers in the green room and they would emerge out occassionally to brief their constituencies on the progress.
The model gathered almost 30 ministers and senior officials, together in the so called "Green Room" but the points of divergences were so divergent that Mr. Lamy informed yesterday`s informal Heads of Delegations (HOD) TNC that he was changing the mode of negotiations to even smaller groups of ministers over an issue and then he will reconvene everyone in a general membership as a formal TNC to ascend to the deal reached amongst these small groups of ministers! By the yesterday, G7 (your guess is right-U.S., EU, Brazil, India, China, Japan and the unusual suspect, Australia!) had emerged as the core negotiating group thats likely to salvage the Round!
But the problem is that other politically insignificant delegations and their ministers had started feeling frustrated and locked out of the process, many of which have left Geneva already! This threatens the consensus amongst the membership and even if the deal was to be reached by the G7 consensus is likely to be difficult to reach in these circumstances (Mauritius minister warned this morning in the ACP/ and G90 coordination meeting).
Poor countries` ministers are heard complaining in the corridors of the WTO about the lack of transparency and inclusiveness of the whole process and that they will be no way they will ascend to a deal they have not negotiated and does not meet their minimum demands from the Round! Things are bad and they seem only to get worse for the MTS!
I will follow the events from inside from now-keep your eye on this space!
Wednesday, July 23, 2008
India`s Government Survives, DDA holding on a Thread!
The Indian Minister of Commerce and Industry Mr. Kamal Nath, jetted in this morning from the Indian Parliament with a confidence vote in his government and assured the Developed Countries`members of the WTO that "I am obviously not here to hand around freebies without getting something in return"! India is seen as crucial for the ministers to get a deal in this ministerial meeting and everybody held his breath (including the big powers ) when Mr. Kamal Nath flew back to Delhi to attend the congress at home which secured the vote of confidence yesterday!
Mr. Kamal Nath and therefore the Indian delegation at the WTO are seeking key compromises in the current rhetorically intensified negotiations - India is seeking serious progress in agricultural reforms in developed countries specifically a substantial reduction in trade distorting domestic support in the major powers (especially U.S.)that will be key in helping reversing the characteristic investment deficit in developing country agriculture. He said this was the major benchmark otherwise members would rather pack they bags and cut their losses now! He belittled the U.S. offer of sealing their Overall Trade Distorting Domestic Support (OTDS) at USD 15 billion as a minimalist offer getting the round nowhere!
Mr. Kamal warned that the world powers cannot make mistakes here in Geneva, they are meeting in a rather grim context of a number of crises in various parts of the world especially the three "FCs" i.e. the Food, the financial and the fuel crises! that an ambitious outcome on domestic support, will get India to start listening! He warned for the case of India and other developing countries Agriculture is a case of life and death, it involves the livelihoods of the poorest farmers who number in the hundreds of millions and that "we cannot have a development Round" without an outcome which provides full comfort to livelihood and food security concerns in the developing countries"
He wondered the logic of the developed countries failure to agree on the Special Safeguard Measures proposal(technically known as SSM in the negotiations jargon) " do developed countries expect us to standby, see a surge in imports and do nothing? Do we give developed countries the unfettered right to continue subsidizing and then dumping those subsidies on us jeopardising lives of billions?" He said this is self-righteousness of Developed Countries and that, this self-righteousness will not do-"If it means no deal, so be it"!
Mr. Kamal Nath and therefore the Indian delegation at the WTO are seeking key compromises in the current rhetorically intensified negotiations - India is seeking serious progress in agricultural reforms in developed countries specifically a substantial reduction in trade distorting domestic support in the major powers (especially U.S.)that will be key in helping reversing the characteristic investment deficit in developing country agriculture. He said this was the major benchmark otherwise members would rather pack they bags and cut their losses now! He belittled the U.S. offer of sealing their Overall Trade Distorting Domestic Support (OTDS) at USD 15 billion as a minimalist offer getting the round nowhere!
Mr. Kamal warned that the world powers cannot make mistakes here in Geneva, they are meeting in a rather grim context of a number of crises in various parts of the world especially the three "FCs" i.e. the Food, the financial and the fuel crises! that an ambitious outcome on domestic support, will get India to start listening! He warned for the case of India and other developing countries Agriculture is a case of life and death, it involves the livelihoods of the poorest farmers who number in the hundreds of millions and that "we cannot have a development Round" without an outcome which provides full comfort to livelihood and food security concerns in the developing countries"
He wondered the logic of the developed countries failure to agree on the Special Safeguard Measures proposal(technically known as SSM in the negotiations jargon) " do developed countries expect us to standby, see a surge in imports and do nothing? Do we give developed countries the unfettered right to continue subsidizing and then dumping those subsidies on us jeopardising lives of billions?" He said this is self-righteousness of Developed Countries and that, this self-righteousness will not do-"If it means no deal, so be it"!
Tuesday, July 22, 2008
Trade Briefing: WTO`s DDA Mini-Ministerial Negotiations 21-26 July 2008 in Geneva, Switzerland
Starting Monday 21st July 2008 over 40 world trade ministers from major protoganist countries in the DDA gathered in Geneva Switzerland to salvage the Doha Development Agenda launched 7years ago in the Qatar capital Doha.
Throughout this week, ministers will struggle to find consensus on the modalities (formulas and othe mechanisms) on how to liberalise trade in the two basic "pillars" of the Round- trade in agricultural and industrial goods. Later in the week, ministers will move into other essential areas of the Round like trade in services, rules and intellectual property rights to ensure that the outcome keeps within the realms of the basic principle of the WTO of "Single Undertaking" which spells that "nothing is agreed until everything is agreed".
Stakes are high, to some this is the last opportunity to avert the threat facing the multilateral trading system, which has seen its recent increasing irrelevance due increasing prominence of bilateral and regional trade agreements among major trading powers and major trading powers with small developing and poor countries.
The dynamics are that advanced developing countries led by India, Brazil, South Africa, largely agricultural producers are asking Developed Countries (Especially U.S. and the EU) to take bold steps and liberalise their agricultural goods markets, cut their overall trade distorting domestic support (OTDS) and eliminate export subsidies on agricultural exports. While Developed Countries are calling for an ambitious market opening for industrial goods on part of these developing countries.
Overall, the developing countries have insisted that an ambitious outcome of the Round should be seen in the context of the Round being a Development Round and interpreted in the context of the Hong Kong Ministerial decision of " less than full reciprocity" in favour of the developing and least developed countries.
By close of business on Monday 21 July, the EU had come foward and offered to cut its farm tariffs by 60 percent from the previous 54 percent they had stuck on, Peter Mendelson EU Trade Commissioner said that the EU was "kick starting a week of crunch-talks on a new global commerce pact"!
While the U.S. has largely indicated that they are waiting to see the contribution of others especially when it comes to advanced developing countries of India, Brazil, South Africa and China! U.S. insists that these countries must open their industrial goods market in return for its cutting its domestic support programmes (farm subsidies).
The big powers of U.S., Japan,and the EU are largely pushing the developing countries to open more of their markets for industrial goods by substantially cutting tariffs while the developing countries are targetting agricultural markets for the highly protected agricultural commodities like rice, beef and wheat in Japan, EU and U.S. markets.
This blog will be following the progress of the negotiations closely and will constantly be updated with respect to the progress, please check regularly for the updates and leave a comment!
Throughout this week, ministers will struggle to find consensus on the modalities (formulas and othe mechanisms) on how to liberalise trade in the two basic "pillars" of the Round- trade in agricultural and industrial goods. Later in the week, ministers will move into other essential areas of the Round like trade in services, rules and intellectual property rights to ensure that the outcome keeps within the realms of the basic principle of the WTO of "Single Undertaking" which spells that "nothing is agreed until everything is agreed".
Stakes are high, to some this is the last opportunity to avert the threat facing the multilateral trading system, which has seen its recent increasing irrelevance due increasing prominence of bilateral and regional trade agreements among major trading powers and major trading powers with small developing and poor countries.
The dynamics are that advanced developing countries led by India, Brazil, South Africa, largely agricultural producers are asking Developed Countries (Especially U.S. and the EU) to take bold steps and liberalise their agricultural goods markets, cut their overall trade distorting domestic support (OTDS) and eliminate export subsidies on agricultural exports. While Developed Countries are calling for an ambitious market opening for industrial goods on part of these developing countries.
Overall, the developing countries have insisted that an ambitious outcome of the Round should be seen in the context of the Round being a Development Round and interpreted in the context of the Hong Kong Ministerial decision of " less than full reciprocity" in favour of the developing and least developed countries.
By close of business on Monday 21 July, the EU had come foward and offered to cut its farm tariffs by 60 percent from the previous 54 percent they had stuck on, Peter Mendelson EU Trade Commissioner said that the EU was "kick starting a week of crunch-talks on a new global commerce pact"!
While the U.S. has largely indicated that they are waiting to see the contribution of others especially when it comes to advanced developing countries of India, Brazil, South Africa and China! U.S. insists that these countries must open their industrial goods market in return for its cutting its domestic support programmes (farm subsidies).
The big powers of U.S., Japan,and the EU are largely pushing the developing countries to open more of their markets for industrial goods by substantially cutting tariffs while the developing countries are targetting agricultural markets for the highly protected agricultural commodities like rice, beef and wheat in Japan, EU and U.S. markets.
This blog will be following the progress of the negotiations closely and will constantly be updated with respect to the progress, please check regularly for the updates and leave a comment!
African Countries Draw thier Red Lines in the DDA Mini-Ministerial Meeting in Geneva today!
African ministers participating in the furore to salvage the Doha Round in Geneva, have drawn their red lines! Led by two deputy prime ministers (Honourable Uhuru Kenyatta Deputy Prime Minister and Minister of Trade of Kenya and Mr. Ramkrishna Sithanen, Deputy Prime Minister, Minister of Finance and Economic Development of Mauritius) has declared in a joint statement that there will not support any deal that falls short of their expectations on one of these key issues of interest to their economies:
Cotton. African ministers are demanding an ambitious, expeditious and specific treatment on cotton in the Round as cotton is key for wide range of livelihoods in their economies. On this issue they have been able to gun support from the Caribbean and the Pacific Countries together with the G20 a group of major developing countries coordinated by Brazil.Essentially they are calling upon members like U.S. to reduce huge subsidies given to cotton farmers in the U.S., market opening for cotton bi-products from African cotton growing countries like Mali, Burkina Faso, Benin (members of the famous C4)
Bananas. The ministers are also calling for a separate treatment of the banana issue from the general agriculture modalities. They are insisting on reviewing the current deal that was reached under the auspices of the WTO Director General Pascal Lamy and they vowed that, they will seek his attention with intent to revise substantially and improve the results on the banana issue taking into account the specific interests and development concerns of the banana producers on the continent. The team on banana is lead by Mr. Mbarga Atangana Luc Magloire, Minister of Trade of Cameroun who is the spokesperson of the group on the banana issue.
Preferential Erosion! The long standing preference erosion will be a make or break issue for Africa and for almost all the developing countries in the current negotiations. The African and the Caribbean countries have long enjoyed preferences with in the developed countries markets like the EU and U.S., these preferences are being threatened by the proposed tariffs cuts and the African countries will fight tooth and nail to save some preferences on some key products (technically being called the preferential products in the negotiations) but these products overlap with tropical products proposed by the developing countries from Latin American Countries causing friction between the two groups. The African Ministers have emphasised the need for a "trade solution" on this issue of preference erosion in which they are seeking an implementation period of atleast 10 years minimum before tariffs are cut (implementing the cuts) on their selected preferential products. They are also seeking developed countries to commit themselves on the non-trade solution to the preference erosion problem by providing technical assistance to the affected countries during the transition period to help them adjust and diversify into other lines of products.
Watch this space for further developments the negotiations!
Cotton. African ministers are demanding an ambitious, expeditious and specific treatment on cotton in the Round as cotton is key for wide range of livelihoods in their economies. On this issue they have been able to gun support from the Caribbean and the Pacific Countries together with the G20 a group of major developing countries coordinated by Brazil.Essentially they are calling upon members like U.S. to reduce huge subsidies given to cotton farmers in the U.S., market opening for cotton bi-products from African cotton growing countries like Mali, Burkina Faso, Benin (members of the famous C4)
Bananas. The ministers are also calling for a separate treatment of the banana issue from the general agriculture modalities. They are insisting on reviewing the current deal that was reached under the auspices of the WTO Director General Pascal Lamy and they vowed that, they will seek his attention with intent to revise substantially and improve the results on the banana issue taking into account the specific interests and development concerns of the banana producers on the continent. The team on banana is lead by Mr. Mbarga Atangana Luc Magloire, Minister of Trade of Cameroun who is the spokesperson of the group on the banana issue.
Preferential Erosion! The long standing preference erosion will be a make or break issue for Africa and for almost all the developing countries in the current negotiations. The African and the Caribbean countries have long enjoyed preferences with in the developed countries markets like the EU and U.S., these preferences are being threatened by the proposed tariffs cuts and the African countries will fight tooth and nail to save some preferences on some key products (technically being called the preferential products in the negotiations) but these products overlap with tropical products proposed by the developing countries from Latin American Countries causing friction between the two groups. The African Ministers have emphasised the need for a "trade solution" on this issue of preference erosion in which they are seeking an implementation period of atleast 10 years minimum before tariffs are cut (implementing the cuts) on their selected preferential products. They are also seeking developed countries to commit themselves on the non-trade solution to the preference erosion problem by providing technical assistance to the affected countries during the transition period to help them adjust and diversify into other lines of products.
Watch this space for further developments the negotiations!
Thursday, May 1, 2008
Could the surge in commodity prices be a panacea for Africa?
Farming in Africa has always been a risky business, often at the mercy of bad weather, drought, low productivity, bad politics and non-remunerative fluctuating farm product prices. Consequently, Africa has long been confined to exporting primary commodities which faced volatile prices and unfavourable terms of trade. However, the recent surge in commodity prices could be changing the face of commodity trade and its fundamentals. The rise in prices of several commodities produced in Sub Saharan Africa is predicted to continue for the far future. For instance, food crop prices have increased globally by more than 85 percent since 2004 and they are predicted to remain above 2004 levels until 2015. This should be good and not bad news for African households and policy makers. It’s the right moment to prioritise modernisation of agriculture as a tool to fight poverty and achieve the millennium development goals by 2015 by taking advantage of the global price incentives to boost household incomes. The food price increases has been predicted as doom and gloom for the continent. However, this needs not to be the case, because there are benefits to reap in the medium and long term for African producers. 48 out of 53 African countries are dependent on commodity exports, including primary agricultural products, minerals and oil products to earn foreign exchange. The recent price boom has affected all these commodities. Africa is a natural basket of most these commodities and enjoys an absolute advantage on their supply.
Most specifically, the food related commodity price increases are attracting alot of global attention. The World Bank warns of more than 100m people, mainly in Sub Saharan Africa, that could be severely affected and plunged deeper into poverty. The Bank president has called for a “new deal for global food policy” to the tune of US$ 500m to support the World Food Programme. In Uganda, where most households are net food producers, the country could benefit greatly from the high food prices through regional food exports.
Oil prices are also booming, a major commodity now widely produced in Africa. Africa contributes 15 % percent of United States (US) energy requirements and is also major supplier to China. This ensures a wind fall of oil revenues to the continent especially to major African producers like Nigeria, Angola, and Equatorial Guinea, Sudan, Chad, Gabon, Cameroon, DRC, Gambia, Libya and soon Uganda. Investing these revenues wisely in education, health, and other sectors of the economy and upgrading of the continent’s physical infrastructure could turn the plight of the continent upwards forever.
A rise in global bio-fuels` production (fuel from crops like sugarcane, maize, soybeans and palm oil) especially in US, Europe and Brazil is another opportunity for Africa. With vast unutilised agricultural land, Africa can grow and cheaply supply bio-fuel crops compared to subsidized and expensive sources in US and Europe. The global drive against climate change and need for energy security will continue to make bio-fuel production a potential source of hope for poverty reduction in Africa if international and national policy makers seize this opportunity. A country like Uganda could be global supplier of grains both for food and bio-fuels under these price incentives.
China and India (the Asian Drivers) are rapidly industrialising and they need metals and ores for their hungry and thirsty construction and manufacturing sectors. The demand for metal ores in China will continue to push the prices for these commodities higher and higher.higher . The changing diets of middle income China and India will contrive to elevate food prices of protein related product likeproductslike milk, meat, pork and eggs in the long run. China’s GDP growth has averaged more than 9 percent since 1995 and makes up to 15.4 percent of the world economy. The country also consumes a third of the world’s iron ore, coal and steel, it is the world largest importer of copper and aluminium and the second largest importer of oil behind the US. Coupled with continued percapita income growth, change in diets, the “Asian drivers”, will lead to both a strong rise in demand for food and mineral commodities and sustain the high prices in long term. China and India also account for 40 percent of world commodity consumers and 20 percent of global purchasing power and their consumption power is predicted to more than double by 2020. All this presents enormous opportunities for Africa’s household commodity producers in form of increased farm incomes once strategically tapped. Its time to revive the Kilembe copper mines among others for Uganda.
The conclusion of the Doha Development Agenda in Geneva presents a tremendous opportunity. World Trade negotiators in Geneva are about to conclude a development trade round which was launched in 2001 in Doha Qatar, which could see shifts in agricultural subsidies in rich countries and reduction in import tariffs in the advanced economies. This could lead to a rise in prices for certain commodities, like cotton and sugar hence increasing income opportunities for commodity dependent developing countries like Uganda Benin, Mali and Burkina Faso for the case of cotton.
In final analysis there is plenty of opportunity for Sub Saharan Africa to turn around its “development puzzle” and get out of poverty by 2015. A country like Uganda can focus on becoming a food basket for the region; refocus its Poverty Eradication and Action Plan. Organise farm households into small plot intensive farming (SPIN-farming) to produce economically viable commodities. For instance, clusters like North Busiro Development Foundation of Prof. Gilbert Bukenya`s upland rice is a venture in the right direction. Also “Boona Bagagawale” and other poverty eradication programs should prioritise agriculture to produce strategic commodities that are going to be in high demand locally and globally, now and in the future rather than cash transfers to households or increasing food aid.
Most specifically, the food related commodity price increases are attracting alot of global attention. The World Bank warns of more than 100m people, mainly in Sub Saharan Africa, that could be severely affected and plunged deeper into poverty. The Bank president has called for a “new deal for global food policy” to the tune of US$ 500m to support the World Food Programme. In Uganda, where most households are net food producers, the country could benefit greatly from the high food prices through regional food exports.
Oil prices are also booming, a major commodity now widely produced in Africa. Africa contributes 15 % percent of United States (US) energy requirements and is also major supplier to China. This ensures a wind fall of oil revenues to the continent especially to major African producers like Nigeria, Angola, and Equatorial Guinea, Sudan, Chad, Gabon, Cameroon, DRC, Gambia, Libya and soon Uganda. Investing these revenues wisely in education, health, and other sectors of the economy and upgrading of the continent’s physical infrastructure could turn the plight of the continent upwards forever.
A rise in global bio-fuels` production (fuel from crops like sugarcane, maize, soybeans and palm oil) especially in US, Europe and Brazil is another opportunity for Africa. With vast unutilised agricultural land, Africa can grow and cheaply supply bio-fuel crops compared to subsidized and expensive sources in US and Europe. The global drive against climate change and need for energy security will continue to make bio-fuel production a potential source of hope for poverty reduction in Africa if international and national policy makers seize this opportunity. A country like Uganda could be global supplier of grains both for food and bio-fuels under these price incentives.
China and India (the Asian Drivers) are rapidly industrialising and they need metals and ores for their hungry and thirsty construction and manufacturing sectors. The demand for metal ores in China will continue to push the prices for these commodities higher and higher.higher . The changing diets of middle income China and India will contrive to elevate food prices of protein related product likeproductslike milk, meat, pork and eggs in the long run. China’s GDP growth has averaged more than 9 percent since 1995 and makes up to 15.4 percent of the world economy. The country also consumes a third of the world’s iron ore, coal and steel, it is the world largest importer of copper and aluminium and the second largest importer of oil behind the US. Coupled with continued percapita income growth, change in diets, the “Asian drivers”, will lead to both a strong rise in demand for food and mineral commodities and sustain the high prices in long term. China and India also account for 40 percent of world commodity consumers and 20 percent of global purchasing power and their consumption power is predicted to more than double by 2020. All this presents enormous opportunities for Africa’s household commodity producers in form of increased farm incomes once strategically tapped. Its time to revive the Kilembe copper mines among others for Uganda.
The conclusion of the Doha Development Agenda in Geneva presents a tremendous opportunity. World Trade negotiators in Geneva are about to conclude a development trade round which was launched in 2001 in Doha Qatar, which could see shifts in agricultural subsidies in rich countries and reduction in import tariffs in the advanced economies. This could lead to a rise in prices for certain commodities, like cotton and sugar hence increasing income opportunities for commodity dependent developing countries like Uganda Benin, Mali and Burkina Faso for the case of cotton.
In final analysis there is plenty of opportunity for Sub Saharan Africa to turn around its “development puzzle” and get out of poverty by 2015. A country like Uganda can focus on becoming a food basket for the region; refocus its Poverty Eradication and Action Plan. Organise farm households into small plot intensive farming (SPIN-farming) to produce economically viable commodities. For instance, clusters like North Busiro Development Foundation of Prof. Gilbert Bukenya`s upland rice is a venture in the right direction. Also “Boona Bagagawale” and other poverty eradication programs should prioritise agriculture to produce strategic commodities that are going to be in high demand locally and globally, now and in the future rather than cash transfers to households or increasing food aid.
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