International actions

Recommendations for the international system to support country-level processes

Trade is among the most politically charged of international issues for development. Though hugely important, it is far from a magic bullet for achieving development. The slogan “trade, not aid” is misguided, particularly in the poorest countries. Trade reforms are complementary to other parts of -development policy, such as infrastructure investments and social programs to develop a healthy and well educated workforce. As outlined in Monterrey, an MDG-based international trade policy should focus on two overarching issues:

• Improved market access and terms of trade for the poor countries.
• Improved supply-side competitiveness for low-income country exports, through increased investments in infrastructure (roads, electricity, ports) and trade facilitation.

To establish an overarching framework for progress, we recommend that global political leaders first agree to a conveniently distant long-term target (for example, 2025) for the total removal of barriers to merchandise trade, a substantial and across-the-board liberalization of trade in services, and the universal enforcement of the principles of reciprocity and nondiscrimination. In the nearer term context of the Doha Development Agenda and the Goals, we recommend that the following key outcomes be agreed upon before mid-2005.

Among agricultural trade issues, highest priority should go to improved market access, with very significant reductions in tariff peaks and escalation and the phasing out of specific duties on the exports of low-income countries (such as cotton). A binding commitment to abolish export subsidies and two-tier price schemes should also be made in the near term.

Developing countries' exports to developed countries face tariffs that are, on average, four times higher than those faced by the exports of other developed countries. Developing countries also suffer from their own protection, which not only reduces competitiveness in world markets but also limits opportunities for more trade among themselves. In the Doha Round developed countries should aim to bind all tariffs on nonagricultural merchandise at zero by 2015. A mid-term goal could be for no tariff higher than 5 percent by 2010. Developing countries could then aim for a zero tariff by 2025. If absolutely indispensable, the poorest countries should aim to bind all tariffs at a uniform and maximum rate for a reasonable period.

Getting service liberalization right requires careful attention to the nature, pace, and sequencing of reform. The liberalization of mode 4 of the General Agreement on Trade in Service (GATS)—temporary movement of labor to provide services—should be adopted as a high priority in the Doha Round. We encourage developing countries to trade commitments to open mode 1 (cross-border supply of services) and mode 3 (foreign direct investment in services) in return for developed countries' real offers on mode 4.

Special and differential treatment makes sense for developing economies that generally have a more limited ability to take advantage of new trade opportunities and to bear adjustment costs. It should encourage flexibility, time, and assistance for implementation. The focus should be on longer terms to adjust to liberalization and improve technology. A temporary “Aid for Trade Fund” commensurate with the size of the task would allow commitments to be made to address adjustment costs associated with the implementation of a Doha reform agenda.

Countries should continue to pursue open trade. But they should also continue to receive additional aid to overcome their supply-side production barriers, with special emphasis on investments in agricultural productivity, infrastructure (such as roads, ports, telecommunications, and power), and labor-intensive- exports. This is particularly important for the Least Developed Countries. Export competitiveness must not be pursued in a way that encourages discriminatory or coercive labor practices or adversely affects the natural -environment—say, through unsustainable forestry or fisheries practices.