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Making trade work for development: speech to the ACFOA roundtable on trade and development, Canberra.

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Speech by to the ACFOA roundtable on trade and development, Canberra, 27 May 2003

Making Trade Work for Development

Ladies and gentlemen

Thank you for inviting me to speak at this roundtable on trade and development.

I want to begin by congratulating ACFOA for organising this roundtable on this important subject and for its ongoing contribution to the debate on development assistance.

Sensible public discussion about trade and development is all too rare.

Indeed some anti-globalisation activists continue to claim that developing countries have little to gain - and much to lose - from international trade and investment.

They firmly believe that trade and development are mutually exclusive despite overwhelming evidence to the contrary.

For example, UK-based NGO Oxfam International calculated that a 1 per cent increase in world export share for each developing country region could reduce poverty by 12 per cent.

Importantly, many developing countries also recognise that trade and investment, and not just aid, drive development.

The link between trade and development

Trade and investment provide developing countries with access to a broader range of goods, services and technologies. Open markets facilitate the flow of private capital and multiply employment, providing the basis for an entrepreneurial skill base.

Indeed, the record shows that open economies are the fastest and most sustainable means of achieving improved living standards.

A World Bank study showed that, in globalising developing economies, the number of people in absolute poverty declined by 14 percent between 1993 and 1998.

That amounts to approximately 107 million people no longer living in poverty.

By contrast, the same World Bank study found poverty in the less globalised developing economies rose by 4 per cent between 1993 and 1998.

That’s 17 million more people living in poverty in these economies.

Between 1980 and 1998, the net effect of these diverging trends was a reduction in global poverty of around 200 million people.

That’s a persuasive, and still enduring, case for the benefits of liberalisation.

Of course, successful economies have not just lowered trade barriers and become more integrated with the world economy.

They typically are undertaking many other reforms at the same time: strengthening the rule of law; building modern economic institutions; providing public health and education, and investing in infrastructure.

This is where our aid programs can make a critical difference, as you well know.

But the fact remains that aid- although valuable when properly targeted - can never be as good a driver of development as trade and investment.

The figures speak for themselves.

Each year, developed countries provide $90 billion in aid.

By contrast, developing countries earn 40 times that amount - $3.6 trillion - from exports and 4 times that amount - $360 billion- from foreign direct investment.

The Doha Development Agenda

The Doha round presents a major opportunity for developing countries to secure better trading conditions, and fairer trade rules, that will help underpin development.

Indeed the mandate for a new round of negotiations agreed at Doha reflects the priorities of developing countries, as much as it does developed economies.

This is only natural, given both the numbers, and increasingly the share of global trade, of developing countries in the WTO.

Those priorities include:

• Capacity-building -- help from developed countries -- so that developing countries can participate in the multilateral trading system; • Special and differential treatment that acknowledges the status and needs of developing countries; • Removal of trade-distorting measures -- such as export subsidies -- in developed

countries, especially in agriculture.

In short, there is much at stake in this round for developing countries.

Australia is taking a lead in helping developing countries participate in the Round.

We will be providing around $31 million next financial year, including:

• $500,000 to the WTO Global Trust Fund which ensures developing countries can engage in the WTO; • a $3 million Regional WTO Capacity Building Project for the Asia-Pacific in trade

policy, WTO market access negotiations and the implications of trade liberalisation; • support for African regional trade initiatives, especially in agriculture; • training in services negotiations for Indonesia and Pacific Island Countries.

We hope that these initiatives will help developing countries become more familiar with the rules of the trading game and thus ensure that they are able to reap the benefits.

Market access

Market access is an important part of the Doha development agenda.

This is especially the case for agriculture, on which Australia shares much in common with developing countries - most of the 100 WTO developing country members are agricultural producers.

Protectionism in developed countries hurts poor countries who depend on agriculture for their livelihoods the hardest, particularly as much of this support is trade-distortionary.

Protection for agriculture in OECD countries was almost US$320 billion last year - six times the total spending on aid and twice the value of all developing country agricultural exports.

Europe’s Common Agricultural Policy (CAP) effects on agricultural trade and development have been highlighted by institutions as diverse as the OECD and Oxfam. Despite this, the links between agricultural reform and economic development are not yet as widely appreciated as they should be.

Australia has played a leading role in the fight for agricultural trade policy reform, as Chair of the Cairns Group of agricultural free traders - most of whom are developing countries.

Australia’s commitment to market access - and not just on agriculture - is also reflected in what we are doing ourselves.

From 1 July 2003, Australia will grant tariff and quota free access for 49 of the world’s poorest countries.

East Timor, although not yet officially designated a Least Developed Country, will also receive tariff and quota free access.

There will be no exclusions, safeguards or special deals for so-called “ sensitive” sectors, such as sugar and bananas, which are important crops for developing countries .

In the area of services negotiations, in which there is considerable developing country interest, Australia has tabled an initial offer early.

In other words, we are putting our money where our mouth is.

Hard work ahead

The Doha mandate is broad and ambitious and the agenda is more complex than previous rounds.

It sets out tight timelines for the negotiations, with the Round to be completed by 1 January, 2005.

Unfortunately, progress has been disappointing in a number of areas.

Negotiating deadlines across the agenda of the Round, on issues of importance to both developing and developed countries, have already been missed or are looking shaky.

This includes deadlines on agriculture, access to medicines, and special and differential treatment for developing countries.

There is little prospect of seeing major breakthroughs on any of these issues before the Fifth WTO Ministerial Conference in Cancun in September.

The Round has been effectively stalled due to the inability - and unwillingness - of the European Union and Japan to come to the party on agriculture.

Just as disappointing is the failure to resolve the issue of public access to medicines in developing countries.

This has been a hot-button issue for HIV/AIDS-afflicted countries, such as Brazil, India, Kenya and South Africa.

Following strenuous collective efforts by the WTO membership, a compromise package was put to WTO Members in December 2002.

While the majority of the package was acceptable to the majority of the WTO membership, it was blocked by the United States, which could not accept the wording on the range of diseases for which countries with insufficient manufacturing capacity

can get access to affordable medicines.

The key to unblocking the impasse - which I believe WTO Members have a moral imperative to do - lies in building confidence between the principal stakeholders of the ultimate resolution.

I am convinced that we can find a solution that both meets the needs of developing country citizens, and continues to provide adequate protection for the owners of intellectual property rights.

We should not let ourselves be discouraged by the difficult negotiating challenges we face.

Australia has called on other developed countries to show the necessary political leadership to get the Doha Round back on track, and to build momentum towards a successful outcome.

I remain optimistic about the capacity of the multilateral trading system to deliver consistent and fair rules, and a level playing field, for developing and developed countries alike.


Ladies and gentlemen

My message today is straightforward: participating in the global economy, with the right economic and social policies and a stable institutional framework, allows countries to lift people out of poverty.

The Doha round offers a historic opportunity to improve the economic prospects of the developing world.

This is an opportunity we cannot afford to squander.

Our strong commitment to a fairer and more balanced global trade regime is the biggest contribution we can make to developing countries and the two billion people estimated to be living in poverty.

I look forward to the contribution that ACFOA and its members can make to this important debate.

Thank you.