Building new trade routes for more development

Date: 14/07/05

Goals: Develop a global partnership for development; develop further an open trading and financial system that is rule-based, predictable and non-discriminatory; address the least developed countries' special needsNearly 14% of the world's population live in Africa but the continent only enjoys a 2% share of global commerce.

Tony Blair, the British prime minister and current holder of the EU presidency, indicated last weekend that a favourable outcome to the World Trade Organization's (WTO) ministerial negotiations in Hong Kong this December would help to redress that balance.

He has declared that if the EU is serious about helping poor countries lift themselves out of poverty then it must introduce deeper reforms to its Common Agricultural Policy.

Rich country leaders attending last week's G8 summit in Gleneagles, Scotland agreed a target of $50 billion (€42bn) in aid to poor countries by 2010. The target pales in comparison to the $257bn (@214bn) that rich countries direct in subsidies and import tariffs to their own farmers and agribusiness each year.

Ian Gillson from the Overseas Development Institute in London estimates that because developing countries cannot hope to compete with such trade-distorting measures, they lose $75bn (e62.4bn) annually or 150% of what they receive in aid.

A positive rewriting of world trade rules during the Doha round of WTO talks, Gillson argues, could increase poor countries' incomes by $150bn (@125bn). Yet he warns that trade "will not be a panacea for African growth". Sub-Saharan Africa, the most deprived part of the continent, could only gain by $20bn (@16.7bn) and some African countries could actually be net losers because they will lose preferential quotas granted to their products by rich countries, including the EU.

The EU's inflexible line on agriculture subsidies has been blamed by many for previous logjams in the Doha round - including the collapse of the 2003 WTO conference in Cancún, Mexico. But both Mariann Fischer Boel, the European commissioner for agriculture, and US President George W. Bush have committed themselves to ending export subsidies in the past fortnight. For Bush, reducing farm support would help reduce the federal budget.

In the past week the European Commission has said that it is prioritising aid for trade. At Gleneagles, it promised €1bn in assistance to developing countries to help them build up their capacities to avail of new trading opportunities.

But there are signs of disharmony between the Commission and the EU's UK presidency between how trade negotiations with Africa should be handled. Peter Carl, the Commission's top trade official, has criticised Tony Blair's government for differing from the policy of the EU executive on the Economic Partnership Agreements (EPAs) being negotiated with the former European colonies in the African, Caribbean and Pacific (ACP) bloc.

In June, African trade ministers voiced opposition to having the so-called Singapore issues - investment, competition policy and transparency in public procurement - included in the EPA talks. Anti-poverty advocates had voiced fears that the Commission could be hindering the ACP countries from regulating the activities of profit-hungry multinational firms.

Yao Graham of the Third World Network in Ghana has argued that a major cause of Africa's "marginalisation in world trade" has been the collapse in prices for commodities like coffee and cotton.

Article looks at what the EU does to achieve the trade-related Millennium Development Goals: 'Develop a global partnership for development; develop further an open trading and financial system that is rule-based, predictable and non-discriminatory; address the least developed countries' special needs'. Article anticipates further WTO talks on the reduction of agricultural subsidies and discusses their impact on developing countries.