Market access: A priority for development

Trade Directorate
Page 51 

David Rooney

Increased trade plays an important role in integrating developing countries into the world economy. But many complain that current global rules make it difficult for them to compete for much-needed markets. Developed countries counter that the list of developing countries is too long for them to make an exception for everyone. How best can these differing interests be met?

Market access to OECD countries: this is one of the most important trade questions between OECD and non-OECD countries as a new round of trade talks gets under way. Although the multilateral trading system, under the auspices of the World Trade Organization (WTO), provides for “special and differential” treatment for developing countries, many continue to face substantial constraints in access to export markets. They can point to relatively high tariffs, quantitative restrictions, subsidies and other measures that undermine their exports in key areas. Improving trade possibilities for manufactured and agricultural products of interest to developing countries has to be a central objective if we are to have a mutually beneficial “development round” of trade talks. Experience to date indicates that through trade-offs in negotiations, progress should be possible.

Since the end of the Second World War, eight rounds of multilateral trade negotiations have succeeded in lowering the average trade-weighted most-favoured- nation tariff rates on industrial goods from roughly 40% to 4%. The most recent rounds have also helped to address some important non-tariff barriers associated with technical standards, import licensing, transparency and other areas. Estimates indicate that once the Uruguay Round agreements are fully implemented, the proportion of imports from non-OECD countries affected by OECD members’ non-tariff barriers will drop from around 18% to 5%. In addition, the Uruguay Round yielded progress in areas such as trade in services.

Nevertheless, despite this broadly improved framework, market access issues still arise concerning products of particular interest to developing countries. In the case of apparel industries, for example, even after the Multi-Fibre Arrangement-related quotas have been phased out (set to be completed by 2005), relatively high tariffs will remain in place on many products. Some sensitive sectors, like leather, remain subject to escalating tariffs that increase according to the degree of processing, which limits developing countries’ export prospects for higher value-added products. Agricultural producers in developing countries, meanwhile, encounter high tariffs, quotas and subsidised exports. And liberalisation in the service sector remains limited in areas such as the temporary entry of service providers, like consultants.

More than two-thirds of the WTO’s 142 members are considered to be developing countries by virtue of their self-designation to that status. While WTO agreements make extensive references to special provisions, rights and obligations for developing countries, there is no official definition of what constitutes such a country. Certain groups of developing countries qualify for more generous treatment under some of the existing provisions. These include net food importing countries, least developed countries and countries with a per capita income of less than US$1 000 per year.

Overall, the developing countries could potentially benefit from 145 special and differential treatment provisions operating within the WTO system. These deal with such issues as: trade opportunities; safeguarding developing country interests; flexibility of commitments; transitional time periods; and technical assistance.

Some developing countries have expressed dissatisfaction with the actual operation of these provisions, however, saying they are inadequate instruments to help them integrate more fully into the multilateral trading system. On the other hand, developed countries increasingly take the view that no single approach can address the needs of such a diverse group of countries. After all, the remedies appropriate to a country like Singapore with per capita income of US$26 600 in 1998 are probably different from those appropriate to a country like Ghana with a per capita income of US$400, and yet, both classify themselves as developing. And even if the remedies were the same, their capacities to adopt them would probably differ.

The WTO operates on a consensus basis, so any progress in trade talks will involve trade-offs between the interests of OECD countries and developing countries. As a result, increased market access and other measures to recognise the special situation of developing countries will need to be balanced against calls for the more advanced developing nations to accept increased responsibilities under the multilateral trading system.

Given that there already is some differentiation among developing countries – least-developed status for instance – it may be possible to further extend the practice of targeting more benefits to a select group of countries facing particular disadvantages. Alternatively, the more advanced developing countries could be promoted from the developing country group, either on a self-initiated basis or using objective criteria, including economic indicators such as per capita income.

Economic success in non-OECD countries is generally associated with integration into the world economy. But liberalisation is only one side of the coin. To succeed, it must be accompanied by appropriate domestic policies in areas such as institutional capacity building, social cohesion, human capital development and infrastructure improvements. These require investment and assistance. But they should not hide the fact, that while additional work is needed, improving market access to OECD markets is the sine qua non of world development. While undertaking multilateral trade negotiations is a tremendous task, it is well worth the global effort by OECD and non-OECD countries alike.

References

• The Development Dimensions of Trade, OECD, forthcoming.

 Dessus, S., Fukasaku, K. and Safadi, R., “Multilateral Tariff Liberalisation and the Developing Countries”, OECD Development Centre, 1999.

 Open Markets Matter: The Benefits of Trade and Investment Liberalisation, OECD, 1998.

 Open Services Markets Matter, OECD, 2001.

 Post-Uruguay Round Tariff Regimes: Achievements and Outlook, OECD, 1999.

 Tariffs and Trade: OECD Query and Reporting System, OECD, 2000 (CD-Rom).

©OECD Observer No 229, November 2001 




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