Maria Figueres-Olsen of
the World Economic Forum chaired the session and the discussants were Professor
Jagdish Bhagwati of Columbia University, Bijit Bora of the Development and
Economic Research Division of the WTO, Noreena Hertz of Cambridge University and
Christopher Padilla of Eastman Kodak Company and the National Foreign Trade
Chairman opened the session by underlining
the importance of market access to Members of the WTO, particularly developing
countries. He said that developing
countries and their developed counterparts had divergent views on this issue and
that it was his wish that the discussants would be able to address the major
elements of this debate.
Bora of the
WTO Secretariat presented statistics to show the changing nature of
international trade. He identified five main product categories, namely primary
products, resource-based products, low technology products, medium technology
products and high technology products. He
stated that while there had been a slow growth in the trade of primary products,
there had been a significant increase in the trade of high technology products.
The share of primary products in the exports of developed countries had
declined over the years, while the share of high technology products had seen a
marked increase. The same was true for almost all developing countries,
with the notable exception of Africa whose exports were still dominated by
primary products and low technology products.
indicated that his analysis would focus only on tariff barriers for industrial
products. In that context, he noted
that it was important for a distinction to be drawn between bound and applied
MFN rates. He said that after the
Uruguay Round, the total share of world imports covered under bound rates was
87%; over 95% of the tariff lines of developed countries and
countries-in-transition were bound, while the share of developing countries was
comparatively lower. On tariff
peaks and escalation, he said that in order to determine their impact on
imports, it was necessary to establish the degree of tariff dispersion, with the
standard deviation being absolute dispersion of tariff levels.
He noted that developed countries generally had low absolute dispersion,
but high relative dispersion affecting products of export interest to developing
countries including textiles, clothing and leather products.
By contrast, Latin America had a low dispersion because of tariff
ceilings, while Africa and Asia had high absolute dispersion but lower relative
dispersion. These translated to
mean that the incidence of national peaks (three times the national average
tariff rate) was higher for countries with lower average rates and lower for
countries with high average rates. Regarding
international peaks (tariff rate in excess of 15%), he said that countries with
high national averages were likely to have quite a few international peaks. With regard to tariff escalation, he said that the tariff
structures of certain developed countries exhibited escalation at the aggregate
level, while those of other countries exhibited escalation at higher levels of
noted that it was important to take into account the role of preferences in
determining the degree of market access. The
statistics revealed significant variations in the market access of developed and
developing countries in the markets of the QUAD countries.
He said that it would be important for Members of the WTO to look beyond
the proportion of world trade that was duty free (55%) and concentrates on the
remaining proportion of world trade that faced barriers.
Attention should also be given to the different kinds of barriers faced
by imports that were duty free.
who was asked by the Chairman to concentrate on how developing countries could
achieve greater market access in developed countries, drew attention to three
major elements which, in his view, affected market access, namely (i) barriers
in developing countries which militated against exports; (ii) supply-side
constraints which prevented most developing countries from participating
actively in the multilateral trading system, and (iii) the degree of market
penetrability in developed countries. On
the first element, he stressed that it was important for developing countries to
liberalize their markets and create an enabling environment for trade to thrive.
There was overwhelming evidence that countries that had adopted open and
liberal policies had performed better than those which had adopted restrictive
policies. On the second element, he said that a significant number of
developing countries were not able to increase or diversify their exports
because of supply-side constraints and capacity-related problems.
He said that there was the need for a concerted effort among all the
important stakeholders to redress this problem. On
the third element, he distinguished between market openness and market
penetrability. A number of developed countries had hidden barriers that made
it difficult for developing countries to penetrate into their markets.
In other words, market openness was not synonymous with greater market
Bhagwati expressed the view that it was necessary for stakeholders to build
coalitions to push for improved market access for products of export interest to
developing countries, particularly agricultural and textiles and clothing
products. He cautioned, however,
that improved market access for textiles and clothing products may be ethically
and politically difficult in the United States, as liberalization would mean
loss of jobs for people at the lower end of the income scale.
He suggested that re-training and other policies could be introduced to
help ameliorate the situation. On
agriculture, he said that government assistance in the form of subsidies mostly
benefited large farmers instead of small farmers. He invited NGOs to join forces with free trade enthusiasts
and other important stakeholders to push for improved market access for
developing countries. He said that
environmentalists couldn’t probably be relied on in this fight, given the
substantial sum of money that had been allocated for environmental causes.
a response to a question from the floor, Professor Bhagwati stressed the
importance of strengthening the multilateral trading system and said that the
system offered better protection to smaller countries.
He criticised the growth in the number of regional trade agreements and
said that agreements between developed and developing countries always tended to
favour the former, which could insert non-trade related provisions into the
agreement. He cited the US –
Jordan Free Trade Agreement as an example and the wish by many legislators in
the United States to use it as a template for concluding future bilateral and
multilateral trade agreements. He
was more supportive of agreements concluded between developing countries.
reference to the 10-point plan of the National Foreign Trade Council to
liberalise world trade but focused primarily on its call for the progressive
elimination of all industrial tariffs by the year 2020.
He said that tariffs remained an issue and should not be discounted.
In 1995, tariffs on industrial products amounted to US$ 190 billion.
He stated that notwithstanding the 22% share of developing countries in
world trade, they paid around 40% of the world's tariff bill.
This was primarily because of the high tariffs imposed by developing
countries on each other's exports. By
contrast, exports from developed countries to other developed countries only
attracted US$ 16 billion in customs duties.
This was not due to high tariffs but significant volumes.
Against this background, he said that it was in the interest of both
developing and developed countries to agree to the progressive elimination of
all industrial tariffs by 2020. For
developing countries, he stated that since south-south trade accounted for
almost 40% of total trade of developing countries and was projected to rise to
50% by 2005, it was important for developing countries to agree to the
elimination of tariffs by 2020. He
said that under their proposal, there could be an asymmetrical reduction of
tariffs with flexibility given to developing countries, particularly
least-developed countries provided the end goal would be reached by 2020, i.e.
the elimination of all industrial tariffs by all Members by the year 2020.
Mr. Padilla also noted that the growth in regional trade agreements was
another reason why their proposal should be acceptable to developing countries.
He pointed out that if progress was not made at the multilateral level,
it is the poorer countries of Africa, the Middle East and South Asia that would
suffer the most in terms of market access to their major markets.
developed countries, Mr. Padilla argued that it would make sense for them to
support their proposal to eliminate all tariffs on industrial products by the
year 2020. He said that developed
countries already paid to each other US$16 billion in customs duties and that
their products faced broadly high tariffs in developing countries. Elimination of these tariffs would provide fresh
opportunities in terms of increasing trade and investment.
He stated that the structure of customs duties in the United States was
penalising consumers at the lower end of the income scale.
He said that whereas clothes and shoes accounted for only 7% of total US
imports, they accounted for 47% of total customs duties collected.
He also stated that tariffs on low quality undergarments and shoes were
generally higher than medium and high quality ones.
The elimination of this "basic necessities tax" would improve
the welfare of poor consumers.
response to a question from the floor, Mr. Padilla said that whereas the
elimination of all tariffs might cause some short-term problems for countries
which relied overwhelmingly on custom duties as a principal source of revenue,
they were other alternatives which could ameliorate the situation such as
improved tax collection and the introduction of a consumption tax or a
value-added tax. He also stated
that countries with very low tariffs were better placed to attract investment
than those with higher tariffs.
Hertz criticised what she saw as the
hypocrisy of developed countries in international trade.
She said that the rules of the game were distorted, as developed
countries protected their markets with tariffs and subsidies, while demanding
developing countries to open their markets to their goods and services.
According to her, the level of subsidies was six times higher than the
level of Official Development Assistance to developing countries. She criticised the recent US Farm Bill, which she said would
further distort agricultural trade by providing several billions of dollars in
subsidies to US farmers. She said
that the EU initiative for least-developed countries did not go far enough and
that the preferences should be extended to all developing countries.
She further said that other QUAD countries, namely the United States,
Canada and Japan should also adopt similar measures.
Hertz said that a significant number of developed countries and successful
developing economies were able to achieve higher levels of economic growth as a
result of protecting their markets and managing trade.
It was unfair for developed countries to call on developing countries not
to adopt similar policies, which ensured their dominance in international trade.
She cast doubts on the link between trade and growth and also between
trade and the reduction of poverty. She
said the evidence was lacking and was at best tenuous.
She further stated that it was not clear who benefited from international
trade. It would appear that it was
only a few underscoring the growing inequality in several countries and between
countries. Professor Bhagwati
disagreed with the contention of Ms. Hertz that the evidence between trade and
growth and trade and poverty was tenuous at best.
He said that the evidence was patently clear and incontrovertible and
that China and India had been able to lift more people out of poverty because of
the liberalization measures implemented by them in the last two decades.
Ms. Hertz countered by saying that Robert Wade of the London
School of Economics had done a lot of work on this issue and that it was still
unclear as to who benefitted from international trade.
She said that a distinction should be drawn between rural and urban China
and India and that consideration should also be given to other elements
including environmental costs and human rights.
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