Policy Coherence for development….Trade
Guest blog by Michael McManus
A couple of weeks back, this blog series claimed it could break down the confusion and complexity which surrounds the policy coherence for development debate with little more than a few hundred words. Today, when faced with explaining how trade and Irish trade policy affect developing countries, I realise that such a promise was perhaps a little ambitious. But, here goes.
(Note agriculture-related trade will be dealt with in a later post)
Understanding Irish trade policy (the boring bit)
Ireland’s trade policy is mostly decided at EU level. It is defined by a single European market allowing for free movement of goods, people and capital. Externally, the EU sets common tariffs for imports into the European Union. This policy is known as the ‘Common Commercial Policy’.
The European Commission implements the Common Commercial Policy. The Commission is advised by various committees such as the Article 113 Committee, made up of senior civil servants from each member state. Decisions on major trade matters can be made without European Parliament consultation, by member state Ministers and where necessary without unanimous support from all EU member states.
European trade policy is, however, largely influenced by agreements reached at the World Trade Organisation (WTO). The WTO seeks to promote economic development through the regulation of world trade and the reduction of barriers to trade. WTO agreements focus on trade in products (GATT), services (GATS), Intellectual Property (TRIPS).
How trade policy impacts upon developing countries (a little less boring?)
Irish trade policy has an impact on developing countries at three different levels.
WTO agreements promote trade by seeking, for example, to open up domestic markets to foreign products and services, reduce trade tariffs and end state subsidies. Agreement on new trade rules is reached at so-called trade rounds – negotiation between WTO members – which can continue for years. The current Doha Development Round seeks to address some of the many imbalances in global trade rules but is now in its tenth year.
Ireland’s commitment to policy coherence means that, as a member of the EU, it bears a responsibility to promote pro-development solutions at the current trade negotiations on the following major issues:
- Goods – ensuring that barriers to the trade in goods over which developing countries have an advantage (manufacturing of electrical goods, textiles, etc) are reduced;
- Services – gaining greater access for developing countries to Western service markets such as Tourism, Software development and maritime transport in particular through temporary free movement of persons;
- Access to essential drugs – ensuring that developing countries can access essential drugs for diseases like HIV and Aids at reasonable prices regardless of patents owned by the world’s largest pharmaceutical companies;
- Protection biodiversity and traditional knowledge – ensuring that TRIPS does not allow abusive patenting of traditional plants, species and knowledge found in developing countries by multinational companies
- Ensuring that patents do not hinder the use of ICT in developing countries
EU General System of preferences
The EU gives preferential access to European markets for developing country goods using two distinct systems – the Cotonou Agreement and the General System of Preferences.
The Cotonou Agreement contains a section dedicated to a non-reciprocal trade agreement between the EU and ACP (African, Caribbean and Pacific) countries. It gives these countries access to European markets at lower tariffs than other countries for a large number of manufactured goods (textiles) and primary goods (oil, coal etc). However due to WTO rules, the Cotonou agreement on trade is being replaced by bi-lateral or regional reciprocal economic partnership agreements which have been subject to much criticism.
Under the ‘General System of preferences’ scheme, the EU gives favourable treatment to developing nations in accessing European Markets on three different levels. The GSP applies advantages to all developing countries. The GSP Plus scheme allows additional advantages to mid-level but fragile developing countries such as Sri Lanka and Columbia dependent on Human Rights, Sustainable development, Labour standards and Good Governance conditionalities. Finally, the ‘Everything but Arms’ agreement provides Least Developed Countries tariff-free access to the European Market for a vast amount of products.
The Cotonou Agreement and the GSP scheme aim to compliment the development cooperation efforts of Ireland and the EU. In practice, however, they present a number of policy coherence issues which the Irish Government should seek to influence on behalf of developing countries:
- The complex arrangement of WTO, regional, bi-lateral agreements make participation in negotiations extremely difficult for developing nations;
- Stringent EU standards on Rules of Origin greatly limit the potential impact of greater market access for developing country goods;
- the EU policy on access for non-sensitive goods is welcome but developing country goods competing with sensitive European goods continue to face higher tariffs;
- advantages given under the GSP scheme may well be used unfairly by the EU as bargaining chips in broader WTO negotiations;
- Human Rights conditionality for the GSP Plus schemes has only ever been used against Sri Lanka and there is little confidence in its application;
- Economic Partnership Agreements which replace the Cotonou Agreement reduce the potential impact of the Everything but Arms Scheme. These and reciprocal bi-lateral trade agreements are reached after unbalanced negotiations between the world’s largest trading bloc and some of the world’s poorest countries..
Part II discussing Aid for Trade and what NGOs can do in this area will follow tomorrow.
A deeper analysis of some of the above mentioned issues is available in the book Policy Coherence for Development – The state of play in Ireland
Other blogs on this topic: