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Africa: Trade Update, UNCTAD

AfricaFocus Bulletin
Jun 22, 2004 (040622)
(Reposted from sources cited below)

Editor's Note

The United Nations Conference on Trade and Development (UNCTAD), held every four years, met in Brazil last week. Participants issued ringing statements in favor of South-South collaboration and the need for greater equity in the international trade arena. The meeting was virtually ignored by the press in the United States and other developed countries. Nevertheless, the conference was an indicator of greater international awareness, among almost all political currents, that the current bias against developing countries is both unfair and unsustainable.

The conference closing coincided with a ruling from the World Trade Organization (WTO) in favor of Brazil and other developing countries that U.S. cotton subsidies violate international trade rules by undercutting the prices of more efficient cotton producers in other countries.

On the sidelines of the UNCTAD meeting, the so-called "non-group 5" of the U.S., EU, Australia, India, and Brazil met and agreed that the interests of all parties, including developing countries, needed to be taken into account in the next stage of WTO talks on agriculture. Developing countries at the UNCTAD meeting, however, also stressed the importance of stepping up joint action outside the WTO negotiations.

This issue of AfricaFocus Bulletin contains excerpts from several articles from the Third World Network, reporting on developments at the UNCTAD meeting. The full text of these and a wide range of additional reports on current trade issues from the perspective of developing countries is available at http://www.twnside.org.sg. Official reports from UNCTAD are available at
http://www.unctad.org. Additional reports from civil society groups in the global South on these issues are available at http://www.choike.org. A report on the state of the World Trade Organization negotiations on agriculture from Focus on the Global South is available at
http://www.focusweb.org/main/html/Article317.html.

Another AfricaFocus Bulletin sent out today contains excerpts from a new report on trade and development written for the Commonwealth Secretariat. See http://www.africafocus.org/docs04/stig0406.php

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Additional note on bilateral US/Africa trade

: A bill extending African Growth and Opportunity Act (AGOA) provisions allowing for easier access to the U.S. market for textiles from some African countries, including textiles processed from "third-country" fabric, has passed the House of Representatives, but is still to be considered by the Senate. African countries and U.S. supporters of the legislation fault the Bush administration and the Senate for failure to prioritize the measure. African countries are already losing orders because of the uncertainty. If the provision is allowed to expire in September, says one strong advocate for extending the exemptions, "AGOA will cease to be commercially viable" ( http://allafrica.com/stories/200406020891.html). For more background and updates see http://allafrica.com/agoa.

++++++++++++++++++++++end editor's note+++++++++++++++++++++++

UNCTAD XI Opens with Calls for a New Trade Geography of South-south Trade

TWN Report by Martin Khor, Sao Paulo, 14 June 2004

Third World Network
http://www.twnside.org.sg

[Excerpts only; for full text see TWN website]

UNCTAD XI opened today with a call by leaders of developing countries to build a "new geography of trade" which stressed the role of South-South trade and cooperation in a globalising world.

Making the call, Brazilian President Luiz Lula da Silva said a 50 percent reduction in tariff in the trade among developing countries could generate an increase of US$18 billion of trade for them.

There was thus a new move, he said, to reactivate the Global System of Trade Preferences among Developing Countries (GSTP), which was formed in the 1980s to make it possible for developing countries to extend trade preferences to one another without extending these to the developed countries.

"To the 44 countries that have signed the GSTP, we could add another 40, and thus draw up a new trade geography of trade."

Lula was speaking at the inaugural ceremony of UNCTAD XI as well as a high-level plenary session immediately after on the New Geography of Trade.

The Brazilian President said UNCTAD had helped developing countries identify the external constraints limiting the developing countries. He quoted statistics showing the deterioration in growth in many developing countries and the widening income gap between North and South.

The world needed to change, he said, but all change needs choices to be made. We need political courage, he said, adding that the negotiations by the Group of 20 in Cancun was a fundamental move, and "we will seek convergence with the needs of developing countries."

Thai Prime Minster Thaksin Shinawatra, whose country had hosted UNCTAD XI in Bangkok in 2000, took up the same theme. Four years after the Bangkok meeting, he said, the world had changed with optimism eclipsed by September 11 and the WTO Cancun ministerial collapse.

Thaksin said we are yet to see globalisation with a human face and the Washington Consensus turned out to be irrational. Globalisation is seen to fail to deliver. The idea of multilateralism itself is eroding.

"Since the cold war ended, there was a drop in aid and the developed countries' trade policies became less accommodating to the needs of developing countries. They have been slow to accommodate the requests of developing countries even in the most obvious areas such as reduction of agriculture subsidies."

Thus, he said, South-South cooperation has never been more necessary. It was tempting to only blame the North but this cannot get results. "For many of our countries, poverty reduction and sustainable development cannot be solved by having market access to the North. We need other options.

Thaksin advocated the principles of self-help (or reliance on domestic economy) and partnership as a response to reduced expectations from the North. "We should expect less from them, and we need to partner more with other countries of the South" he said.

"We should reduce our overwhelming dependence on markets of developed countries and diversify our risks through South-South trade. Critics note the diversity of the South and say it is an obstacle to South-South trade but I say let us celebrate the diversity of the South and try things that have not been done."

Thaksin admitted there is no guarantee that South-South cooperation will work better than North-South relations. But in North-South relations, the South has been facing the problem of the North moving the goalposts "whenever we are about to score."

The North is not yet so convinced they should not do that, so we should start another game we can win, he said. Thailand had already created new frameworks to strengthen trade relations with other developing countries and he looked to UNCTAD XI to practical alternative solutions, with the South to become stronger and the North to be more understanding and accommodating.

UN Secretary General Kofi Annan stressed there was a lack of coherence in the international and domestic economies. African farmers wanted market access to the North but find this blocked by manipulative systems, whilst indigenous people with knowledge of medicinal herbs do not know if they would be recognized and rewarded.

Referring to double standards in Northern policies, he said: "We usually call it the lack of coherence, but we can also call it discrimination. We look to UNCTAD XI to change it."

Kofi Annan said we needed a development-friendly trade regime. A successful conclusion to the Doha agenda is also needed and this can be achieved only if the South is granted full access to the Northern markets and if agricultural subsidies are reduced or eliminated.

We must take advantage of South-South trade opportunities and cooperation, he added. "A new round of talks to expand the GSTP holds promises. If developing countries can reduce tariff margins to one another by 50%, this will generate an extra USD15.5 billion in trade.

"It could be a new global trade geography, which would help give the South a rightful place in international relations." ...


UNCTAD XI consensus Declaration adopted after lengthy tussles

TWN Report by Meena Raman, Sao Paulo, 18 June 2004

Third World Network http://www.twnside.org.sg

After lengthy tussles on controversial issues over the past nine months, UNCTAD XI has adopted the main text, called the Sao Paulo Consensus, which in effect is the Declaration of the eleventh session of the United Nations Conference on Trade and Development (UNCTAD XI). It was adopted at the closing session on 18 June. ...

The Sao Paulo Consensus is a 24 page document which contains policy analysis and responses needed in relation to four topics: development strategies in a globalizing world, building productive capacities and international competitiveness; assuring development gains from the international t6rading system and trade negotiations; and partnership for development.

From Tuesday to Thursday this week, there were negotiations on the uncompleted 18 paragraphs of the draft negotiated text which have been in brackets. Work on the last of these were completed Thursday. Diplomats from developing countries were quite satisfied with the results.

Perhaps the most important outcome relates to the issue of "policy space". Developing countries have been arguing that they require the space and flexibility to carry out national development policies and that this space had recently been constrained and narrowed by international rules, and may become even more limited by future international rules.

The developing countries had called for a recognition of their right to this policy space and thus a better balance between this policy space and international rules.

Developed countries, especially the United States, were concerned that recognition (through an intergovernmental consensus such as at UNCTAD XI) of the right of developing countries to such "policy space" would enable the latter to strengthen their bargaining position to elude the rich countries' pressures for them to undertake more liberalization and privatization commitments, especially at the WTO, and through IMF-World Bank loan conditionalities or through aid conditionalities.

This issue was resolved under paragraph 8, which now acknowledges that "it is particularly important for developing countries, bearing in mind their development goals and objectives, that all countries take into account the need for appropriate balance between national policy space and international disciplines and commitments."

The text also states that "the increasing interdependence in a globalizing world and the emergence of rule-based international economic regimes have meant that the space for national economic policy (especially in trade, investment and industrial development) is now often framed by international disciplines, commitments and global market considerations.

"It is for each government to evaluate the trade-off between the benefits of accepting international rules and commitments and the constraints posed by the loss of policy space."

According to some diplomats from developing countries, the paragraph on "policy space" was an important development in UNCTAD XI as it was the first time that the concept of the developing countries' need for policy space (and especially in the context of international rules and disciplines) had been had been recognized in an inter-governmental consensus document. ...

[The report from TWN continues with more detail on resolution of disagreements between developed and developing countries on other issues in the text, including the role of UNCTAD, corporate responsibility, and development financing.]


UNCTAD XI: Calls to Break the "Conspiracy of Silence" on Commodities

TWN Report by Goh Chien Yen, Sao Paulo 15 June 2004

Third World Network http://www.twnside.org.sg

Participants at an UNCTAD XI event today called on UNCTAD and other agencies to "break the conspiracy of silence" on the commodities crisis and to take comprehensive action.

At the same event, UNCTAD Secretary-General Rubens Ricupero announced that UNCTAD will set up a global partnership for commodities to deal with a diverse range of commodity issues and problems. The partnership, he said, will take the form of an international task force on commodities involving "all interested stakeholders."

Ricupero said there were different problems relating to different commodities, so no single agency had a recipe for solutions. "The time has come for a global partnership for commodities," he said, adding that the idea comes from a recent initiative of the UN General Assembly to establish an independent expert group on commodities.

Following the report of the expert group, UNCTAD is suggesting the establishment of a partnership on commodities using a networking approach, which will also involve the Common Fund for Commodities, the World Bank, ITC, ILO, Commonwealth Secretariat, and civil society groups and the private sector.

It will deal with a diversified range of subjects, including production, diversification, improving value added of products, and re-evaluation of old compensatory mechanisms. ...

Many speakers and participants at the session highlighted the seriousness of the commodities crisis and the plight of commodity-dependent countries and producers.

Ricupero said he was thrilled last year when President Chirac of France spoke of a "conspiracy of silence" on commodities and tried to launch a special initiative on commodities at the Evian G-8 meeting. However Chirac did not get a response from the other leaders.

Some developed countries had said there was nothing to be done about commodities and that the market would take care of the problems. "This is very curious as the same countries are spending $3 to 4 billion a year in subsidies to support their cotton."

They could start by completely withdrawing support from cotton, if they believed what they said, added Ricupero. But there was no basis in economic science for leaving it to the market to solve the commodity problem. Even neo-classical economists had recognized the need for action on commodities, which had been a prominent topic at the meetings to set up an International Trade Organisation (at Havana).

Ricupero recalled that later there had been the commodity agreements. The coffee agreement had been the result of President John F. Kennedy's wisdom in wanting to help the Latin American countries. When the political support was no longer there, the agreement collapsed. This was not because it was inherently wrong. What happened after the collapse was much worse than the situation at the time of the agreement.

"Whatever the shortcomings of the coffee agreement, the producers were incomparably better off then than they are today," said Ricupero. "We have not solved the problem, and there is no way we can avoid facing the problem." ,,,

Martin Khor of the Third World Network, said the "conspiracy of silence", that President of Chirac had exposed, was unfortunate, as the commodity crisis was probably the biggest trade problem for many developing countries.

From 1980 to 2000, world prices for 18 major commodities fell 25% in real terms, with the decline being steep for cotton (47%), coffee (64%), cocoa (71%) and sugar (77%). The effects were devastating: Sub-Sahara Africa was losing an average of 16% of its GDP in 1987-89 from terms of trade decline (compared to 1980), while the situation worsened much further in the 1990s.

Khor said he hoped UNCTAD's relative silence on the issue in recent years was not because of immense pressure on it. Referring to Ricupero's announcement of establishing a partnership on commodities, Khor said UNCTAD "should not be shy" of taking the lead on the issue and the lead to "break the silence on commodities."

When Ricupero replied at this point that UNCTAD could do so if requested by the governments, Khor asked participants in the room if anyone present would object to UNCTAD's leadership role on this issue. When no one showed objection, Khor said that it was right for UNCTAD to be the lead agency, especially since the very creation of UNCTAD was inspired by the need to combat problems of low commodity prices and of declining terms of trade.

In the 1970s and 1980s, negotiations on commodity agreements under UNCTAD had been the main international trade negotiations. The collapse of many agreements was due not so much to their inherent weakness, but the withdrawal of political support of developed countries.

In the wake of lack of international action, and the ill-advised policy of the Bretton Woods institutions in promoting the export of commodities in many developing countries, and their loan conditionality to these countries to close marketing boards and end subsidies, an over-supply situation had developed for many commodities, leading to the continuous decline in their prices.

Khor proposed an action plan for commodities. He said the UN and UNCTAD in particular should give the highest priority to resolving the commodities crisis, which should not be neglected further just because it was not on the WTO's agenda. An international UN conference should be convened to discuss comprehensively the wide range of problems faced and possible solutions.

Khor added that many experts, including previous speakers, had identified over-supply as the main factor causing price declines. Thus, it was crucial to find ways to reduce over-supply and align global supply more with demand, to stabilize prices.

He called for a review of the possible positive role of producer-consumer commodity agreements, drawing on the positive elements of previous and present agreements, and building on them. The political will should be found to revive the concept of agreements, which could however be run differently if necessary.

In the absence of such agreements, producers should cooperate to rationalize their global supply so as to better align it to global demand, and such initiatives should be encouraged and not be frowned upon. It was useful to develop South-South cooperation in this regard, as part of the "new trade geography" announced at UNCTAD XI by Brazilian President Lula the previous day.

Developed countries should also eliminate as soon as possible export subsidies and other subsidized forms of export competition, as well as trade-distorting domestic subsidies, under all boxes in the WTO agriculture agreement, so as to stop unfair competition with developing country commodities.

The Bretton Woods institutions should review and change their policy advice such as requiring countries to expand commodity production even if there is a surplus, and to close state marketing boards without making provisions to fill the void.

Brazilian Agriculture Minister Roberto Rodriguez said the easiest way to reduce the rich-poor gap was for developed countries to open their markets to developing countries. This was because they had only a small minority dependent on agriculture and they could also afford to pay their farmers not to produce. ...

Nigeria's Ambassador to the WTO, Matthew Nwagu, said UNCTAD should take on more roles in the commodity issue as most commodity aspects were under the purview of UNCTAD. He said poor peasants could not meet the high standards set by the North. Moreover, developing countries simply could not have a say in the level of commodity prices due to the over-supply situation. The cocoa producers, for example, were helpless in the situation. The World Bank and IMF had also removed the state marketing boards but there was no successor put in their place and this had contributed to the ruin of commodity trade, and there is now a yawning gap. He urged UNCTAD to consider what it could do on the whole range of issues.

The managing director of the Common Fund for Commodities, Rolf Boehnke, said the meeting had succeeded in stimulating discussion on the many problems, which included low prices, debt, supply constraints, overproduction, market access barriers and limited access to finance, and the market distorting effects of subsidies. Areas that were mentioned for action included enhancing production, improving product quality, improving standards, diversification, enhancing production of emerging products and cooperation among producers. The Common Fund took note of the proposal to hold a comprehensive commodity conference and it would join with UNCTAD, governments and NGOs to develop an agenda for action.


AfricaFocus Bulletin is an independent electronic publication providing reposted commentary and analysis on African issues, with a particular focus on U.S. and international policies. AfricaFocus Bulletin is edited by William Minter.

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