Australia's trade agenda balances the developed and developing worlds

This time last year WTO trade ministers gathered in Doha, in Qatar, to consider a mandate for a new round of negotiations.

I came away from that meeting with the firm conviction that existing notions of trade policy and approaches to trade negotiations – still promoted by some in Australia – were no longer sufficient nor effective.

Just as we needed to broaden our approach by allowing for the negotiation of Free Trade Agreements, we also needed to adopt new and creative approaches to the multilateral system.

I believe the meeting in Doha confirmed a new strategic environment for the multilateral trading system.

A new strategic environment

The global trade agenda is now much more complex, sophisticated and multi-layered.

Three facts are clear.

• To be successful, and to protect and advance our interests, we are going to have to seek and maintain alliances across the whole range of issues, and across the entire membership of the WTO.
• Rich countries cannot make demands of developing country members without taking into account their concerns – and their bargaining power.
• And one clear message from my experience at Seattle was the need for ministers to be engaged personally, through new informal ways to move the negotiations forward – such as the meeting of trade ministers I will host in Sydney.

At the beginning of the 1994 Uruguay Round there were 86 members of the GATT, the predecessor to the WTO.

Today, there are 145 members of the WTO, with the vast majority being developing economies, including China, which gained entry to the WTO at Doha.

Developing countries have found themselves a new voice, and a new influence, within the organisation, and therefore in the negotiations.

This was demonstrated in Doha – where the mandate for a new round of negotiations considered by WTO trade ministers reflected developing country priorities, such as:

• Capacity-building, so that developing countries can participate fully in the multilateral trading system;
• Special and differential treatment, through measures such as tariff preferences, and extra time to meet agreed commitments, that acknowledges the status and needs of developing countries;
• Implementing WTO commitments, especially the obligations of developed countries to open their markets to products from developing countries, such as textiles and footwear;
• Confirming provisions for access to pharmaceuticals to fight HIV/AIDS, malaria and other diseases, and;
• Reforming market access and trade-distorting measures, such as export subsidies, in developed countries, especially in agriculture.

Australia is committed to playing an active role in all the key negotiating groups.

In particular, we intend building on our extensive experience and credibility with developing countries – including as chair of the Cairns Group – to further our objectives in agriculture and other key areas.

Responding to the development agenda

Australia has acted to respond to the concerns and priorities of developing countries.

Last month the Prime Minister announced that Australia will grant tariff and quota-free access to the world’s least developed countries from 1 July 2003.

Least-developed countries such as Bangladesh, Cambodia and many parts of sub-Saharan Africa, as well as East Timor, will benefit.

Australia also has taken a lead in helping developing countries participate in the Doha Round.

Last month I announced a $3 million Regional WTO Capacity Building Project.

The project will begin next year, and will focus on training for developing countries in the Asia-Pacific in three key areas:

• First, in the area of trade policy development;
• Second, training to help these countries participate in market access negotiations, and;
• Third, training to help them pursue the benefits of trade and investment liberalisation.

The project comes on top of a series of trade-related programs in the Asia-Pacific region, worth some $16.5 million dollars this financial year.

• We have provided funds to help developing-country members of the WTO who do not have a mission in Geneva.
• Together with the South African government, we have trained African trade negotiators to help African countries maximise their engagement in the negotiations.
• We have also contributed to a global trust fund supporting the Doha development agenda.

Helping ensure that developing country WTO members are able to participate in the multilateral trading system is not just a gesture; it is directly in Australia’s own interests, for two basic reasons.

• First, if more countries are trading, more wealth is generated and it is more evenly distributed, contributing significantly to global security and stability.
• Second, Australia shares strategic interests in the global trade negotiations with many countries. And of course Australian business has strong commercial interests in many of these countries.

Aid vs trade

Today, developing countries recognise that it is trade and investment, and not just aid, that drive development.

They recognise that aid, in itself, is no solution to the economic problems of the developing world.

Indeed, aid alone only perpetuates dependence on others for economic, social and, ultimately, political stability and growth.

Open economies are the fastest and most sustainable means of achieving improved living standards and greater wealth.

Those economies that have most actively engaged in the world economy have lifted their people out of poverty and improved their wellbeing – on almost any key social measure.

In East Asia, for example, absolute poverty has halved over the past 20 years – a persuasive, and still enduring, case for the benefits of liberalisation, over and above what can be delivered by aid.

The fact is that aid – valuable as it can be when properly conceived and targeted – can never be more than a mere fraction of what can be earned by developing countries through trade and investment.

• Each year, developed countries provide $90 billion to developing countries in official development assistance, or aid.
• By contrast, each year developing countries earn 40 times that amount ($3.6 trillion) from exports.
• And, each year, developing countries receive 4 times that amount ($360 billion) in foreign direct investment.

Moreover, foreign trade and direct investment delivers market results and flow-on benefits to developing country economies.

• It provides access to a broader range of goods, services and technologies.
• It accelerates the flow of private capital and foreign exchange reserves.
• And it acts to multiply employment, providing the basis for local work forces to develop an entrepreneurial skill base.

A recent study by Oxfam concluded that increasing the share of world trade by developing countries by just five percent would generate an extra $640 billion in revenue for them.

Development and market access

The benefits of trade and investment liberalisation for developing countries are clear. That is why market access is central to the Doha development agenda – a point that Oxfam and other prominent NGOs are now strongly advocating.

Australia’s commitment to market access is reflected in what we have been doing ourselves for more than 20 years.

We have benefited – and continue to benefit – greatly from lower barriers to trade and investment, both in our own market and overseas.

Without meaningful market access to overseas markets for all countries, real and sustainable economic growth will be that much harder to achieve.

This is especially the case in agriculture, where Australia shares much in common with developing countries.

Agriculture contributes vitally to our nation’s export performance: one in five dollars earned from selling Australian goods overseas is earned by agriculture, and two-thirds of our agricultural production is exported.

Nearly 60 years after the Bretton Woods system was established, and the GATT formed to lower barriers to trade, agricultural products are still being treated differently to industrial products.

And markets for agricultural goods remain skewed by protectionist barriers – tariffs on agricultural products, on average, are three times higher than on any other product you might find in the supermarket.

The World Bank has estimated that rich countries subsidised and protected their farmers to the tune of US$350 billion in 2001.

That is nearly US$1 billion every day, or seven times the value of official development assistance from OECD countries to developing countries, or twice the value of all agricultural exports from all developing countries.

• In the European Union, the UK-based Catholic Agency for Overseas Development estimates that the average EU cow receives about $4.00 in taxpayer-funded support every day. So a European cow receives more, each day, than 3 billion people in the world’s developing countries earn.
• In the United States, a highly restrictive and complex quota regime on sugar is accompanied by an extraordinarily high out-of-quota tariff barrier calculated at 181 percent - effectively preventing developing country sugar producers from accessing one of the world’s richest markets.
• And in Japan, even after eliminating non-tariff barriers, the Japanese rice market remains protected to an extraordinary degree – according to the WTO, Japan’s rice tariffs are 406 percent. Making it almost impossible for Cambodia’s subsistence rice farmers to access this lucrative market.

Australia has led the fight for agricultural trade policy reform in the WTO, especially as Chair of the Cairns Group of agricultural exporters which brings together developed and developing countries.

The Cairns Group is a great example of a very effective lobby, with influence and negotiating power beyond the sum of its constituent parts, many of whom are developing countries.

With their newfound influence, developing countries have said they will not accept the status quo – and at Doha all WTO members committed to reforming agriculture, with a strong mandate for improving market access, reducing domestic support, and eliminating export subsidies.

There are some critics who say that we concentrate too much on agriculture – that the international trade agenda is a broad one, and that agriculture shouldn’t be allowed to hold back other negotiations.

Well, they are wrong, because they fail to grasp the importance of agriculture to Australia’s export performance, and the benefits that global reform would bring to this distorted sector.

They are also wrong because they fail to understand the dynamics of the multilateral trading system: that the key to success in the Doha Round of multilateral trade negotiations is agriculture, and that without progress on agriculture there can be no progress in other key areas.

Without a satisfactory conclusion on agriculture, there will be no conclusion of the Doha Round.

Conclusion

Australia’s longstanding commitment to a rules-based WTO system – in which all WTO members can participate – remains the bedrock of the Liberal/National Government’s trade policy.

If we want the Doha Round of global trade negotiations to succeed, we need to take account of the new strategic realities of the multilateral trading system.

We have to grapple with an agenda that is broader, and far more complex, than any undertaken in previous rounds of multilateral trade negotiations.

We need to acknowledge and accept the newfound place and influence of developing-country interests in any new round of negotiations, given both their numbers, and increasingly their weight in the share of global trade.

And we need to find new ways of moving the agenda forward during the negotiations, given the newfound value of informal contact, and coalitions and alliances built around specific interests – in the way we all hope and expect the meeting in Sydney this week will operate.

We need to be creative and flexible in dealing with the developing country issues.

And we need to do this in ways that will ensure momentum is maintained so that substantive negotiations can begin next year.

For Australia, the Sydney meeting is an opportunity to build on traditional alliances. It is an opportunity to show our developing country colleagues that the WTO can work for them.

Importantly, it is an opportunity to reinforce the message that the round cannot be concluded without a successful and timely resolution on access to medicines and, ultimately, an ambitious outcome on agriculture in line with the Doha Development Agenda mandate.

I am confident that, together with the other participants at the Sydney meeting, we can unlock the door to the successful conclusion of the Doha Development Round in a manner that will ensure greater global openness.

Australia has always been recognised as an assertive advocate of trade reform and we will continue this advocacy in search of a fairer and more balanced global trading regime.

Because we believe it is in our national interest.