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#4: How can global and regional integrations be managed in relation to the WTO?

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Soonho.Kim
#4: How can global and regional integrations be managed in relation to the WTO?

How can Africa manage global and regional integrations, including the goal of a continental free trade area (CFTA), in relation to the WTO?

Jacques Berthelot
Trade and regional development

This comment was first posted on the FSN forum.

The concession granted to the LDCs of not having to reduce the customs tariffs, -- given  that the structural adjustment policies in reality already prevented them from being  increased -- and allowing  for their exports  not to be taxed in the majority of developed and emerging countries, has been a poisoned chalice. Following the EU Everything but Arms (EBA) initiative opening its markets without customs taxes or quotas on their exports, Via Campesina and  the Réseau des organisations paysannes et des producteurs agricoles d'Afrique de l'Ouest [West Africa Network of Peasants and Agricultural Producers] (ROPPA) underlined in a joint communication of 13th May 2001 that "the priorities of the peasants and their families in the LDCs is firstly to be able to produce for their family, then to have access to the domestic market, much before exporting. The European decision on the contrary only goes to strengthen the profits of the large companies using LDCs' resources and labor to export crops towards the EU … thus increasing food insecurity."  Indeed, according to UNCTAD data, exports from African LDCs have increased much less towards the EU28 than to the rest of the world, from 2001 to 2016: 38.5% less for all products combined and 43.6% less for food products, despite the EBA program. And the manufactured products share of their total exports towards the UE28 has passed from 34% in 2001 to 20% in 2016. All the resources mobilized for these exports have reduced those available for food self-sufficiency. In this respect, the food deficit of the LDCs has increased by 12.5% per year from 1995 to 2016, because their imports have increased 9% and their exports 6.6%.

Furthermore, the EU obliges LDCs of the ACP (Africa, Caribbean and Pacific) to reduce by 80% their custom tariffs on their exports in the framework of regional Economic Partnership Agreements (EPA), violating in this way its Declaration "Everything but Arms."  The EPA combined with West Africa could therefore see a reduction in the customs receipts - custom tariffs plus VAT on imports - accumulated for these countries of 32.2 billion euros between 2020 and 2035, of which 15.5 billion euros for the LDCs, and among these 3.9 billion euros on agricultural products.

Another scandal arises in the importance of subsidies to agricultural products exported by the developed countries, in particular the members of the EU, who refuse to take into account the internal subsidies, never considered in the free trade agreements, in particular the EPAs, under the pretext that the rules concerning them are the exclusive competence of the WTO. Yet, the EU has refused a debate on the green box, under which title they notify the detached subsidies - 38.3 billion euros in 2015 - and which does  not take into account subsides on animal food in exported animal products. Thus, the EU28 subsidies to its world exports of dairy products has reached 2 billion euros in 2016, with a dumping rate of 13.2%. On this total, the subsidies to West Africa were 168.6 million euros, with a 20.8% dumping rate. Likewise, the 59.3 Mt of cereals exported by the EU28 in 2016 were subsided by 3.585 billion euros (60.4 euros/ton), a rate of dumping of 34.4% on bulk grain. Of this total, the 3.4 Mt of cereals exported to West Africa have benefited from subsidies of 215 million euros. There again ,the completion of the regional EPA will strongly increase this dumping because the customs tariffs on cereals, other than rice, will go from 5 to 0%, which will already happen for the interim EPAs  of Ivory Coast and Ghana.

It is urgent to radically reform the EU agricultural policies, and those of developing countries including South Saharan Africa, in respect of food sovereignty so as to achieve the second of the SDGs on food security. To ensure a sustainable agricultural development, the Sub-Saharan African countries must modify radically their agricultural policies by ensuring stable and remunerative prices to farmers. That means that the regional economic communities like ECOWAS and EAC become complete members of the WTO, in the same way as the EU. They will benefit from consolidated customs tariffs because their common external tariffs (CET) only affect the customs duties applied. They could then reform their CETs on variable levies - so efficient for the EU to develop agricultural production before the WTO - so that the ad valorem equivalent of variable levies does not exceed the consolidated duty.

So that the levies on agricultural prices do not penalize the poor consumers, these regional economic communities will implement a large scale domestic food aid program, in the form of regional food products, as is done in India and the USA, funded by international cooperation, in particular, long term loans from the International Development Association (IDA), subsidiary of the World Bank. That would be one element of a” Marshall plan” for Sub-Saharan Africa, besides an infrastructure component for the domestic exchanges,  a component for the transformation of local food products to substitute imports of wheat and a component for  non-agricultural employment by lifting the customs duties on the textile-clothing sector to ensure profitable outlets for African cotton. This assumes that the EU stops aligning itself with the USA in order to find within the WTO a permanent solution to the rules on public stocks of food security.

Jacques Berthelot 

SOLFrance

Krishna Rao Pinninti
Regional trade

This comment was first posted on the FSN forum.

Boosting intra-African trade in agricultural commodities and services, when properly handled to reap the benefits of comparative advantage in agricultural production, tends to be a good idea. However, various rules and regulations under the WTO regime do not mean much on the ground. This is because of lack of transparent and accountable mechanisms and enforcement of rules at different levels. Various provisions may remain on paper rather than enhance trade and food security. Given the limited total market power of the region for trade volume there should be little surprise that the mechanisms cannot contribute to effective agricultural transformation. 

What remains more relevant in this context is the role of value chain approach to production, processing and export, within the region and outside - based on sustainable agriculture methods and focus on small farm innovations. Provision of self-enforcing incentive mechanisms (such as recognizing and supporting high productivity) could be useful. Inter-agency cooperative efforts (domestic and international) will be rewarding to the populations, in general.  Excessive expliotation of natural resources to maximize trade can be detrimental to sustainable production, trade and development. The focus needs to be more on the fulfillment of Sustainable Development Goals using pragmatic mechanisms in this context.

see also: P K Rao International Environmental Law and Economics (Blackwell)

                 P K Rao The World Trade Organization and the Environment  (Macmillan)

Krishna Rao Pinninti

Climate and Development Strategies LLCUnited States of America

 

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