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New Zealand has long held the view that the potential financial and welfare gains for developing countries that would be generated by a fairer international trading system far outweigh the financial flows to them from aid. Nevertheless, aid has a vital role in helping developing countries take advantage of new trading opportunities.
The principle that trade can reduce poverty, but that developing countries face challenges making trade work for development, is a core theme of New Zealand’s trade and development policy. This is why for many years New Zealand has offered duty-free access to imports from most Pacific Island countries. In 2001, New Zealand extended that facility to all of the world’s least-developed countries (LDCs), making it one of the first developed countries to do so.
Development concerns are at the heart of the current World Trade Organisation (WTO) negotiations. The current negotiations are called the “Development Round” and this underlines the importance of achieving a positive outcome for developing countries. The Doha Ministerial Declaration November 2001 [external link to WTO website] recognises the importance of the development dimension of the Round, stating in the second paragraph:
“International trade can play a major role in the promotion of economic development and the alleviation of poverty. We recognise the need for all our peoples to benefit from the increased opportunities and welfare gains that the multilateral trading system generates.”
New Zealand believes that the Doha Round represents the single best opportunity to realise the development potential of trade by addressing the harmful distortions in the international trading system. Reform of trade-distorting practices in agriculture in particular, will be of significant net benefit to developing countries. There are also potentially big gains for developing countries in the areas of services and non-agricultural market access.
New Zealand recognises that trade will not solve all the problems faced by developing countries, but believes that developed economies must ensure that the opportunity to benefit from globalisation is available to everyone.
The development aspects of the Doha Development Agenda range from specific issues identified by developing countries as priorities; the provision of special and differential treatment within individual negotiations, and broader objectives including improved market access and the provision of technical assistance. Some of the most important elements of the current negotiations include:
SDT is a concept which recognises that developing countries face specific challenges as a result of liberalisation. SDT includes provisions that allow for:
In addition, the Doha Round will probably see the creation of targeted new instruments as part of the SDT package, such as the “special products” category (products important for food security and rural development) and a new special agricultural safeguard for developing countries. In the Doha Round it has been accepted that LDCs will be exempt from having to make any new reduction commitments.
Improved market access for agricultural products holds the promise of substantial benefits for developing countries, particularly given their comparative advantage in this area. At the same time, developing countries have some concerns relating to the impact on food security and rural development of opening their own markets for certain products. It is expected that SDT provisions will be designed to take account of these concerns. Under non-agricultural market access, sectors of significance include textiles, clothing and footwear, forestry and fisheries. These are all important industries for developing countries.
Services trade is also important to many developing countries. Many services, including infrastructure services and services incidental to agriculture facilitate growth, while services such as environmental services can, if managed properly, improve quality of life. In addition, developing countries have their own export interests in services ranging from construction to education, with a particular emphasis on services provided via the temporary entry of service-suppliers into the country where the service is delivered. These exports also contribute to growth in neighbouring developing countries.
The use of trade-distorting subsidies – both “domestic support” measures and export subsidies – significantly distorts the global trading system. The main users of these measures are large developed countries. Trade-distorting domestic support encourages over-production in the subsidising country: this surplus is often then exported (using export subsidies) for less than the cost of production, which has the effect of displacing and/or reducing the world price for many of the agricultural commodities that developing countries trade. This system also means that subsidisers are reluctant to open their markets to efficient producers such as those in developing countries, since this would undermine farm incomes in the subsidising country.
A three-pronged approach will be important to achieving a positive development outcome:
Many developing countries face domestic and supply-side constraints when seeking to maximize the opportunities that come from trade liberalization. Continued and improved trade-related technical assistance and capacity building is a vital component of trade and development.
New Zealand is seeking an ambitious outcome in the Doha Round. There is considerable overlap between the objectives of developing countries and of New Zealand in the Round, particularly in the areas of agricultural market access, the elimination of export subsidies and trade-distorting domestic support.
New Zealand considers that:
New Zealand provides technical assistance both bilaterally, through the New Zealand Agency for International Development (NZAID), and multilaterally.
For more information on New Zealand’s trade and development policy go to: Harnessing International Trade for Development (see related resources).
For more information on New Zealand’s approach to trade and development in the context of the WTO, read the joint NZAID/Ministry of Foreign Affairs and Trade paper written in advance of the 2003 Cancún WTO Ministerial meeting (see related resources).
