In your recent statement made in Davos, Switzerland, you voiced frustration over how things were going with major countries, which you said are avoiding the multilateral trading platform and focusing on bilateral and regional trade discussions. Why would some countries, mostly in the least developed category, aspire to join the multilateral platform while others are trying to dodge it?

Pascal Lamy: In trade matters, we have a multilateral platform that has been built constantly for the last 60 years. The problem we have in the World Trade Organisation (WTO), now, is not that we do not have a platform, a system and rules that govern multilateral trade, we have that. We administer and follow that every day.

Where we have a problem is that the negotiations for the new version of the system are not yet concluded. We have a rules-based system. As long as we do not change the rules we have; we apply the rules we have.

Where there has not been agreement yet is on the new version. It is WTO Version 3.0 which is not ready, but WTO Version 2.0 is being implemented. The reason that Version 3.0 is not agreed [upon yet] is because of fundamental political disagreements between big players.

Of course, the [global economic] crisis is not helping. The multilateral system cannot be in good shape if members of the system are in bad shape. You can see that in trade, climate change, currencies, and multilateral coordination. Trade is not an exception.

After Russia’s accession to the WTO, we cover 97pc of world trade. Roughly 30 countries are in negotiations to join it. Once this has been done, the WTO will be a universal organisation. The rule is to be in and the oddity should be to be out. Countries want to join because they want to benefit from the insurance policy that this multilateral trade system provides in exchange for their concessions in the global economy.

Q: If you were to emphasise the benefits that joining the WTO brings and the advantages that come from introducing domestic reforms in the process of accession, where does the biggest benefit comes from?

The proportion of reforms depends on the country. If your economy is extremely competitive, it is the market access that is the main benefit. If your economy needs some sort of organising, then, it is the upgrading of the regulatory system that brings the most benefit to the economy. The reality is that it mostly brings both benefits.

Q: Where do you place Ethiopia in these terms?

I think it is both. It is a bit like China at the time [of accession]. There is a synergy and dialectic between what it does to join and upgrade its trade regime to WTO standards. This implies a lot of preparation, verification, and checkups on domestic regulatory systems, and it will join the WTO only when members have the certainty that Ethiopia’s trade regime is alright with the standards.

That is what is called a multilateral trading regime. It is like, if I want to run the New York Marathon, I have to provide a certificate by a doctor that I am fit to run a marathon. The WTO is providing the certificate that Ethiopia matches the standards.

Ethiopia is now the largest (in population size) country among non-members of the WTO. It has moderately stepped into the global economy but without any insurance policy on the rules of the game. For the moment, it is playing the game of international relations by itself.

The others are playing the game, the rules of which they have accepted and regulate the way they trade. It is basically opening trade with predictability, stability, transparency, and fairness. What Ethiopia wants to do in joining the Organisation is to benefit from these rules of the game. Ethiopia will benefit from more market access, [too].

As it is now, if Ethiopia trades with a country, and if this country decides that it does not like Ethiopian exports, the country can do what it wants. Once Ethiopia is member of the system, others cannot object to Ethiopia’s exports.

Second will be the quality level for investors. We know very well from experience and recent examples like Vietnam, Cambodia, Ukraine, and Saudi Arabia that the moment countries get the WTO quality standard, investors are sure that Ethiopia plays by the rules of the game. It works two ways. Ethiopia benefits from playing by the rules of the game, and the others also benefit from it playing by the rules of the same game.

The price paid by Ethiopia is to provide WTO members the appropriate level of stability, predictability, and transparency in its trade regime. Ethiopia, as a least developed country (LDC), is entitled to specific treatments. In order to join and benefit from the system, Ethiopia might not be required to make the same commitments as Russia or Saudi Arabia. But, it will benefit from trade access to a market larger than Russia or Saudi Arabia.

Q: Are you satisfied with the pace that Ethiopia has been progressing, so far? It started its formal application in 2003.

There have been moments of activity as well as slowdown. We have been back to a good level of activity for two or three years, now. It inevitably takes some time for all legislation on property, investment, and licensing requirements to be compiled. There is a [large] bulk of regulatory infrastructure with the necessity to upgrade.

It also takes time to stabilise and consolidate the trade regime in terms of market access, which is on goods, and the maximum tariff that Ethiopia will set. It is [just] a ceiling, [so] Ethiopia always has the freedom to go below it. On services, Ethiopia will have to tell other WTO members, with all clarity and transparency, which sectors will be open for foreign operators.

Q: Talking to Prime Minister Meles Zenawi, do you have a sense that there is that political will or determination to join the WTO? I have been hearing you talk about how political will is lacking, in a broader sense, among different member countries in the negotiation process, true?

My role here in Ethiopia’s accession, is twofold. There is supply and demand; I have to help the demand and the supply to meet. That is my normal work. And, of course, I have to make sure that we mobilise enough resources globally, not only from the WTO, but also from the World Bank, the International Trade Centre (ITC), and the United Nations Development Programme (UNDP) in order to raise the necessary awareness and knowledge in Ethiopia and enhance capacity.

On this subject, we have had a very long and friendly discussion with Prime Minister Meles Zenawi. Although he is a prime minister of a country and I am director general of the WTO, we have a functional relationship. He is a friend of mine, and we have a sort of personal relationship that allows us a lot of informal exchanges. My feeling is that, he wants his country to join the organisation because he knows that remaining outside of this organisation would be at a cost to the development of his country.

Then, he wants to do this [based] on conditions that he believes will benefit his country. Others may have a different view on what is good for Ethiopia. After all, all are entitled to freedom of thought. But, it is for the Ethiopian government to decide what is good and what is not good and the balance.

Q: How do you characterise your meeting with him?

It was inevitably a technical meeting. We reviewed where we were, where we came from, and what the next steps should.

Q: Are you happy with the progress, so far?

It is not a question of me being happy. It is a question of this process leading to the end, and the end of the process is, yet, not in sight. It is a long process of preparation and maturation.

So far, the sort of reenergising that started two years ago has worked. Ethiopia is on the verge of advancing one more step in this direction, I understand, which is the tabling of its offers on tariffs for goods to other WTO members. Once that is done, we will have crossed one more step.

Then, we will still have to work on the legislative action plan: a sequence of processes that involves various ministries, regulatory agencies, and Parliament, at the end of the day. Once the negations on goods are done, then, we will go on to the negotiations on services, which, we all know, is a sensitive one.

Q: Talking to him, do you think that he is prepared to open the economy to the extent that negotiating countries such as the US, the EU, and Canada are demanding?

It is under negotiation. You have to see both sides of the question.

“This Ethiopian market, growing at over 10pc a year, which is a sort of Chinese rate, is good. I would like to access this market,” I would say if I am the US, Canada, or the EU.

“I have to be careful about what I do and how much and when I open up because I want my system to not be broken. I want to do this at the necessary quantum.

At the end of the day, this is something that must be negotiated with the necessary transition period so that the country can have time to adjust. I will take precautions because I will be bound within the WTO to a level of commitment that I am sure I can live with, and, then, if I can do more on my own, I will do it and test it. But, I know that I have joined and benefited from the system on the terms that I can implement, but I can always do more, unilaterally. If I can do more unilaterally, I will negotiate to remove it from my commitments,” I would say if I am the Ethiopian authorities.

Q: Since the WTO Ministerial in Cancun, Mexico, you seem to have had a change in strategy where you would rather have agreements made on smaller issues and avoid the most controversial ones, yes?

The last time we tried the big package full speed was in 2008. Cancun was in 2003. We nearly got there in July 2008.

Since then, we have been stuck on one of 20 issues, which was the agenda of industrial tariff reduction between, basically, the US and China. What we did in December 2011 was to agree that, while the big package is stuck by this geopolitical conundrum, we now have to try a sort of issue-by-issue, more piecemeal approach, and we are now testing that in Geneva. We had a meeting in Davos to reconfirm this.

Q: Do you think Doha has hope to survive?

As is always said, negotiations never die; they are never dead. They sometimes get into deadlock. I know of no international negotiations that die. Often, they go on for decades and decades, [though]. They sometimes go [just] to stop and then go again. That is the natural cycle.

Q: What sort of initiative do you think should be taken by the multilateral platform to move forward from the Doha Round?

What needs to be done is to test the ones that can be concluded early. Approach the low hanging fruit. The easier to conclude [negotiations] must be approached in the short-term.

What is happening is that members have decided to do it pragmatically. Thus, the approach is to explore the possibilities silently and pragmatically.

Q: Considering what happened to the global economy in 2011, you projected that 2012 would be a very difficult year for trade. What are the bases of your fears?

The numbers forecasted on world economy almost similarly show that growth will stay lower than that of 2011. Both the World Bank and the IMF estimated that growth for the world economy will only average 2.5pc, which is lower than the previous year.

On top of that, it is very unbalanced growth, because the developed nations are to grow by a marginal 1.5pc, while developing countries will see a 5.5pc growth rate. The world economy is slowing down.

When the economy slows down, trade slows down. Trade is, in most ways, a translation of supply and demand. [When] demand shrinks, supply shrinks and trade shrinks. When demand grows, supply grows and trade grows.

Q: What do you want to see African countries, particularly LDCs, do in order to offset this bleak projection?

For a continent like Africa, it is not all bleak. It is bleak for the EU and probably the US, which is only part of the trade relationship for Africa.

It is bright for Asia, which is a growing part of [trade] relationships for Africa. There is bad news in traditional markets and good news for new markets.

My advice for Africa, as I said at the AU Summit [last week], is to strengthen trade within itself. Given the global uncertainty, which I think is here to stay, the most important thing will be growing intra-African trade. This will make the economy of the continent more resilient and less prone to external shocks, like what happened on the EU, the US, China fronts.

There is a huge potential for the Africanisation of African trade. Asia, the EU, and North America trade with themselves 60pc, 60pc, and 40pc, respectively. Africa’s trade with itself is only 10pc.

Q: But, you know that it just does not happen simply because you wish so, right?

It is not only about a wish. There is now a roadmap based on regional integration processes. It is the way that Africa prefers to follow. There are regional integration processes that can serve as building stones for continental effort.

My own view, that I always say frankly, is to start at home with your neighbours. If you do not trade with your neighbours, you will not trade properly with the rest of the world. It is as simple as that. Regional integration processes are of the utmost priority for Africa, I strongly believe.

If you compare Africa with other regions of the world, you have an incredible number of countries and an incredible number of landlocked countries. If you look at Africa from the moon, the first thing you might notice is that there are many countries in this part of the world. This, indeed, will have huge trade consequences.

Q: Joining the WTO is all about having negotiating capacity. We all know that LDCs are limited by their resources in their negotiating efforts. Part of your job is to build that capacity, you earlier mentioned. But, the WTO has been criticised for not doing enough on these terms. How much capacity building are you prepared to do now?

The capacity issue is well recognised by the WTO. Because the LDCs have a lower capacity, they can accede to the WTO differently than richer countries. The accession regime in itself recognises this lower capacity issue.

We also have specific programmes, either WTO-specific trainings, awareness raising programmes, or partnership programmes with multilateral organisations. On top of that, we have the Aid for Trade Programme, which provides the WTO with an overarching mandate to mobilise more development assistance for the benefit of trade capacity building. This is the area that has seen remarkable growth. The amount of official development assistance (ODA) going for trade capacity building has increased by 40pc or 50pc since 2005. We are looking at remarkable achievements in those areas.

Q: But, as Ethiopia was about to start the real talks, we saw a USAID programme, specifically designed for trade negotiation capacity building, closed, recently.

Closing a support programme may be a good sign that the support worked. After all, if I see a support programme that has been there forever, I would doubt whether it is working.

Look at the way the Chinese do it. They will be there for three years, they tell you, full stop.

Q: Are you impressed with the building that they built in Addis Abeba [for the AU Headquarters]?

Who would not? It is built to impress.




Source: http://addisfortune.com/