South Asia Cohesion in in the WTO – A potent force

1. National Consultation of Project on “Doha Round and South Asia – Linking Civil Society with Trade NegotiationsNew Delhi“Development Dimensions”17 September, 2005 By Kailas KarthikeyanUNCTAD

2. South Asia Cohesion in in the WTO – A potent force • Natural Geographical Contiguity and shared commitment towards making trade an important driver of economic growth. • South Asia - 25% of the World’s population, but 40% of the World’s poor. • Common interests in agriculture and manufacturing like textiles and clothing and Mode 4.

3. Theoretical Linkages • Trade effects development by: • reducing poverty in the traded goods sector through productivity gains, wages, employment, technology etc • Improving real incomes through price effects • Changing revenues and hence amounts available with governments for social expenditures • Multiplier growth effects

4. Freer Trade could contribute to developmental gains in South Asia by: • Opening Agricultural Markets • Raising Wages of Unskilled Labor • Boosting Productivity • Inducing Investment • Possible Head Start through Immediate Free Access for the Poorest Countries in the Region

5. Trade Liberalisation and adjustment costs • Adjustments costs vary from sector to sector. • Gradualism Vs Swift sharp shocks • Sequenced trade liberalization and the optimum use of flexibilities under the existing framework ensured better preparedness within the industry. • Policy reforms aimed at structural changes in industry structure • E.g. SME policy • Strategy to be framed to address the social costs of trade liberalisation,

6. Agriculture • Agriculture is the most important sector to liberalize globally • RCA clearly in favour of horticulture and grains • Processed foods have shown increases in income, employment and hence liberalisation will be of benefit

7. Agriculture The gains to South Asia through decreases in “effective” domestic support and tariff reduction likely to be significant including in terms of poverty reduction

8. NAMA • Textiles and clothing are key to poverty alleviation strategies • Contribution of small scale vital for poverty reduction and contribution to exports also high • Tariff escalation and tariff peaks in major markets continues to be high and effects South Asia negatively

9. NAMA • Average tariff imposed by developed countries on T&C imports is 12% compared to 3.8% for industrial products. • While only 6.7% of the total value of US Imports shoes and clothing account for almost half of all the tariff revenue collected – about $ 9 billion . (Oxfam 2004)

10. NAMA • Tariff-peak problem is almost wholly concentrated in textiles and apparel and agriculture • Free trade in textiles and apparel would generate 31 percent as much in global welfare gains as would adoption of free trade in all other manufactured and non-agricultural goods. (Cline, 2003)

11. Services and GATS negotiations • Autonomous liberalisation Vs Commitments • Need for a sound regulatory framework • Deeper liberalisation required for poverty reduction

12. Services contd. • Liberalisation of mode IV and poverty alleviation effects • Asymmetric level of commitments under mode IV (only 2% commitments) • Importance of remittances (transaction costs) • Temporary presence in all service sectors is undermined by ENTs, nationality and residence requirements, admin. and visa procedures indicated at the horizontal level. • Concept of “GATS Visa” • Need for defining the “temporary” nature of migrants

13. Trade Defence Measures and Poverty • Trade defence measures common in sectors such as textiles and marine products, where involvement of poor is significant. • MFA phase out and trade defence actions forming a new “line of defense” • The EC- Bed Linen saga • 1000 workers lost jobs in a factory in Pondicherry alone –Oxfam though case was won by India

14. Multilateral approaches Required • Approaches to trade liberalisation • Uruguay Round approaches of reciprocal commitments on trade may not be optimum for poverty alleviation • Experiments with asymmetric and differential liberalisation may be required • Simulations show that differential liberalisation likely to yield the maximum poverty benefits for the region.

15. Reduction in Poverty from Global Free Trade (millions) Source: William Kline

16. Conclusions and Recommendations • Overall Liberalisation of poverty sensitive sectors required, e.g agriculture, mode 4, textiles and garments, and other labour intensive sectors. This will have multiple effects on both poverty and hunger. • A different approach to liberalisation with wider liberalisation amongst developing countries and deeper liberalisation amongst developing countries required. • Non-tariff barriers need to be addressed specially in areas where developing countries have emerging comparative advantages

17. Global Interdependence • Growth engines may be shifting from developed countries to developing countries such as China and India. • Perspective of global interdependence should guide adjustment of global imbalances: • Ensure further economic catch-up by China and India and its expansionary effects for most other countries; • Increase global demand stimulus from Euro area and Japan through better market access for developing countries.