What the WTO ministerial conference could mean for LDCs

As 2015 comes to a close, the parade of high-level events — from the third International Conference on Financing for Development in Addis Ababa, Ethiopia, to the United Nations General Assembly in New York and the just completed Paris climate change conference — wraps up with the World Trade Organization’s ministerial in Nairobi, Kenya, this week. It’s a big year for the WTO — the ministerial will mark its 20th anniversary — and it comes at a time when mega-trade deals like the Trans-Pacific Partnership and a growing number of regional or bilateral deals raise questions about the organization’s role in global trade. For developing countries it could also be an opportunity to secure additional funding for trade assistance, and perhaps more importantly, try to find consensus around some thorny issues, including agricultural subsidies. Enhanced Integrated Framework Before the official proceedings get underway at the ministerial conference, donors will gather for a pledging conference for the Enhanced Integrated Framework. The organization was established in 1997 by the WTO, the International Monetary Fund, the International Trade Center, the U.N. Conference on Trade and Development, the U.N. Development Program and the World Bank, in an effort to provide least developed countries with support in building their trade capacity. “LDCs need a concerted effort and support to build trade capacity,” said Ratnakar Adhikari, executive director at the EIF Secretariat. The EIF has made a few reforms, improving efficiency and enhancing effectiveness, and is now ready to move into phase two. But first it will need to convince its donors to provide the roughly $300 million it will need at its pledging conference Monday. Some early commitments have come in, but most existing donors, and some new ones indicated they would continue to support the organization, Adhikari said. EIF’s main work is diagnostic trade integration studies for LDCs and then providing additional support for projects or institution strengthening based on the priorities identified in those analyses. Those projects include a ginger washing plant in Nepal, several projects in Cambodia supporting the silk and rice markets, and the construction of an air cargo terminal and equipment to process customs in The Gambia. Having positive results at the EIF pledging conference may well set the tone for the week. “It’s an important signal to LDCs that [the international community] is ready not only to make trade possible, but to help make trade happen through aid for capacity building,” said Arancha Gonzalez, the executive director of the International Trade Center. New members Notably, two LDCs — Afghanistan and Liberia — will formally join the WTO at this ministerial, having completed the requirements and presented a plan for continued progress. For Liberia, the process took about seven years, but got its final push when President Ellen Johnson Sirleaf reached out to the WTO’s director general last year and asked to fast track the process. Assistance from the EIF, UNCTAD, ITC and the Swedish government supported the technical work necessary to pave the way. While donor support has helped direct trade policies to this point, Liberia will continue to need support to improve policy, modernize the customs process and working on the nontariff barriers or bottlenecks that impact trade, said Axel Addy, Liberia’s minister of commerce and industry. And while Liberia will have it’s moment at the conference, Addy said it is also looking at the bigger picture. The country would like to see agreements that benefit LDCs emerge from the ministerial conference — from the replenishment of EIF, which it hopes will fund future projects, to agricultural subsidies and market access improvements for African goods. What to watch Perhaps in part because this conference is being held in Kenya, there is a lot of talk about the expectations that it should deliver for Africa and LDCs. One of the key issues of contention will be the Doha Development Agenda, which by many estimations has failed. In a speech in Geneva a few weeks ago, WTO Director-General Roberto Azevêdo said that very little progress has been made on the DDA and that “we haven’t been able to advance in many of the major DDA issues such as agricultural domestic support, for example, or any aspect of market access — whether agricultural, non-agricultural or services.” It may be possible to achieve a consensus on some of the issues, he said, but not without a lot of hard work. An LDC package might include new duty-free, quota-free agreements, and new policies on cotton and rules or origin. “This is an opportunity to get results that developing countries have been trying to secure for so long,” Azevêdo said. But progress on some of those more contentious issues may leave LDCs caught in the crossfire between developed countries and emerging markets including India and China. Part of what’s at stake in any deal that’s worked out are provisions for special and differential treatment — in other words, the concessions that large emerging economies will receive in comparison to developed countries. The two camps also have expressed differing views on what happens after Nairobi, particularly to the DDA. Developing countries want to see DDA issues addressed, but some developed countries argue that the process itself has failed and needs to be replaced. There had been hope that one marker of progress would be that the Trade Facilitation Agreement would come into force at the ministerial. But it now seems unlikely that the necessary two-thirds of WTO members will ratify the agreement in time, though some are hopeful it will happen in the next few months. The TFA, if implemented, would reduce worldwide trade costs by between 12.5 and 17.5 percent according to an Organization for Economic Cooperation and Development analysis released in June. It would do so by recommending provisions like an electronic single window customs system. In 2012, Rwanda introduced such a system, enabling traders to submit customs documents online and it cut by half the time required to clear goods — helping businesses save about $10 million a year. The trade facilitation agreement can also help countries like Liberia, where it can be a part of the solution to achieving the chief goal of poverty reduction. “[With] the right development assistance and the right support to LDCs through the trade facilitation facility we can be more competitive,” Addy said. “The TFA is just one pillar that helps contribute to that goal of improving the business climate to attract investment, ensuring our SMEs have access to global value chains, getting rid of the bottlenecks ... that impact the cost of doing business and the cost of trading in our economy.” The ITC does a lot of work on trade facilitation and after discussions with several ministers Gonzalez believes it will be ratified soon, so the organization’s focus is now shifting to implementation. “Paris and Nairobi are the first two tests for the international community on the sincerity of commitment they took in September in the U.N. General Assembly towards eradicating extreme poverty by 2030,” she said. “You can’t be preaching on Monday that you will use trade opening and the reduction of barriers to trade as an engine for inclusive and sustainable growth and that you want an economy that is less intensive on cardon dioxide emissions, and then on Friday find you’re incapable of doing it.” Join Devex to network with peers, discover talent and forge new partnerships in international development — it’s free. Then sign up for the Devex Impact newsletter to receive cutting-edge news and analysis at the intersection of business and development.