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Info Service on UN Sustainable Development (Jun24/07) The ongoing subsidies war worth hundreds of billions of dollars in alleged violation of the WTO rules appears to have disadvantaged the African and other developing countries who can hardly compete either with the trans- Atlantic trade giants or the world’s second-largest economy, China, said people familiar with the development. The African Group has called for a level-playing field to enable them to implement “industrial policy measures to transform their production structure due to among others, existing rules that uphold the status quo.” At a meeting of the WTO’s Committee on Trade and Environment (CTE) on 19 June, the African Group reiterated its call for re-balancing the WTO rules to enable the pursuit of green industrialization policies. It highlighted “a critical oversight by developed countries that historically used similar measures to advance their industrial development.” “In response to the reality of unequal distribution of the gains from trade and share in global value chains, there is a need to re-balance and re-calibrate the WTO policy toolbox,” the African Group argued at the CTE meeting. Given the speed with which the US, the EU, and other industrialized countries are pursuing green industrialization policies by seemingly going against the rules of the WTO’s Subsidies and Countervailing Measures (SCM) and other covered agreements, the African Group appears to be adopting a legitimate route by seeking a change in the WTO rules. “This is more so given the imperative of addressing contemporary challenges such as mitigating climate change and promoting sustainable development,” the African Group said. So far, the African Group has circulated the following proposals: 1. Policy Space for Industrial Development – A Case for Re-balancing Trade Rules to Promote Industrialisation and to Address Emerging Challenges such as Climate Change, Concentration of Production and Digital Industrialisation (WT/GC/W/868); 2. A Case for Re-balancing the Agreement on Subsidies and Countervailing Measures (ASCM) – Policy Space to Promote Industrialisation in Developing Countries – Communication from the African Group (WT/GC/W/880); 3. The Role of Transfer of Technology in Resilience Building: Reinvigorating the Discussions in the WTO on Trade and Transfer of Technology – Communication from the African Group (WT/GC/W/883, WT/GC/W/884, WT/GC/W/885, WT/GC/W/886, WT/GC/W/887, WT/GC/W/888); 4. A Case for Re-balancing the Agreement on Trade-Related Investment Measures (TRIMs) – Policy Space to Promote Industrialisation and Structural Transformation in Developing Countries – Communication from the African Group (WT/GC/W/896). It has also become an imperative for the African Group to break out of their historical commodity dependence trap, including the latest attempts by major industrialized countries to perpetuate the commodity cycle through their critical raw material sources, said several people from the region. STRUCTURAL TRANSFORMATION The African Group cogently argued that “in the wake of the multiple crises that buffeted the world since the COVID-19 pandemic, the global economy is marked by deep economic divergences, with activity in many developing regions and countries still below pre-pandemic levels.” Despite positive reports of a turnaround in African countries by some recent WTO reports, it said that “the export baskets of most developing countries in general are, however, predominantly commodity-based, essentially primary commodities.” It is well established that “commodity dependence leaves developing countries vulnerable to international price shocks, particularly in the context of global uncertainty, with such events among others triggering reversals in capital inflows and generating macroeconomic dislocation that results in dwindling revenues, debt spirals, inflation, and poverty.” Citing the IMF World Economic Outlook 2024, the African Group pointed out that the secondary effects from international price shocks “compound(ed) the development challenges faced by many developing countries.” “UNCTAD goes further to point out that a country’s Human Development Index value is significantly and negatively correlated with export concentration and commodity dependence.” “This reality,” the African Group said, “amplifies the importance of manufacturing and value addition as the bases for developing sustained industrial capabilities. This has been true of those middle-income countries that broke out of the middle-income trap through innovation-led growth with a strong focus on industrial upgrading and productive services.” Worse still, in the global rush for critical minerals by major industrialized countries, “Africa’s historical position, fixed at the bottom rung of global value chains, could potentially worsen if trade rules do not promote structural transformation.” According to the African Group proposal, “the multilateral trade rules cannot remain static in the face of these extant challenges and historical patterns of international trade that have inhibited structural transformation and crippled the resilience of many developing countries, especially African economies.” It argued that “the WTO has an important role to play in contributing to inclusive development and, principally, meaningful integration of developing countries in global value chains.” Consequently, the African Group argued that “export diversification is a crucial factor for resilience.” “It is vital for global stability that all countries build resilience in their production base and that their exports are broadly diversified,” and it “demonstrates the relevance of policy space to promote industrial upgrading.” MC13 FAILURES The African Group acknowledged that “MC13 could not produce the outcome”. However, “the rich engagements on this topic by Ministers highlighted the urgency of the WTO to confront the structural transformation and industrialization challenges faced by many developing countries.” According to the African Group, “several Members underscored the need to re-balance existing trade rules, particularly in the Agreement on Subsidies and Countervailing Measures (ASCM), Trade-Related Investment Measures (TRIMs), and Trade Related Aspects of Intellectual Property Rights (TRIPS), including technology transfer, in a manner responsive to their development needs and facilitating the integration of developing countries into global value chains.” More importantly, the African Group said the “policy instruments” it had identified in the run-up to MC13 “has even greater significance today in light of the green transition.” It pointed to “the longstanding papers it has submitted on several occasions to the WTO over the years to explore how trade rules can become a positive force for promoting shared growth and inclusive development, including in the race towards a green transition.” The central goal of its proposals on “policy space” is that “trade rules should create an enabling environment for developing countries to undertake measures to promote structural transformation and industrial development.” As a way forward, the African Group called for re-calibrating “specific WTO rules to make them fit for purpose, primarily to support structural transformation and inclusive development.” It emphasized the need for “focused and structured” discussions relating “to the specific aspects of each identified agreement while introducing in some cases a sectoral dimension to facilitate the discussions.” The African Group said that it “will pursue discussions in the CTD as a focal point for the consideration and coordination of work on development in the WTO, including relevant WTO subsidiary bodies, as necessary and in line with their technical mandates, e.g. the SCM Committee, TRIMs Committee, the TRIPS Council, WGTTT [Working Group on Trade and Transfer of Technology], etc.” “Such engagements will be canvassed in formal regular agendas of these meetings and through other modes of engagement, including thematic sessions,” it informed members. It called for meaningful “progress on the re-calibration of the rules to advance industrialization and structural transformation ahead of MC14 and believes the GC [General Council] is well placed to make decisions between Ministerial conferences.” The GC will, therefore, need to provide oversight on the work undertaken by the various Committees through periodic reports by the Committees on their respective work to inform decision-making, it said. +
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