CUTS/WTO Regional Outreach CUTS/WTO Regional Outreach ConferenceConference

AfT in DDAAfT in DDA: Challenges and Strategies for EAC: Challenges and Strategies for EAC

By

Victor Ogalo

Programme Officer

CUTS Africa Resource Centre, Nairobi

voo@cuts.org

Mauritius

Kenya

Denmark

Australia

Singapore

Uganda

CAR

B. Faso

B. Faso

Key challenges and constraints Key challenges and constraints for EAC Trade policiesfor EAC Trade policies

The development of EAC countries is severely affected by the following “Trade Problematique”:-

1. low level of industrialization,2. inability to access advanced technologies,3. lack of domestic savings to invest,4.high dependence on primary exports, declining

terms of trade and volatile export earnings,5.vulnerable balance of payment (BOP) situations,

requiring sufficient reserves, not only to cover current imports, but for long term stability,

6.high cost of capital, which is not taken into account for example in dumping cases against developing countries, nor in the rules on export subsidies,

7. inefficient infrastructures,

Key challenges and constraints Key challenges and constraints for EAC Trade policiesfor EAC Trade policies

8. inefficient taxation systems in which it is difficult for the country to calculate the rebate of indirect taxes, thus penalizing exporters,

9. inability to meet standards of developed countries like EU and difficulties in preparing and enforcing the required technical regulations,

10. lack of access to distribution channels,11. high percentage of population employed in the

agricultural sector, mostly at subsistence levels,12. food insecurity, especially for low income groups,13. lack of resources for subsidization,14. difficulties in protecting against theft of

traditional and indigenous technologies.

Key challenges and constraints Key challenges and constraints for EAC Trade policiesfor EAC Trade policies

Other Challenges are: The external challenges: pressure from

buyers; competitive capability in price and quality standards, mainly SPS and TBT; other NTBs

The internal constraints: NTBs; weak management and low competitiveness; low level of labor skills, unstable labor forces;

Political obstacle: limited democracy and voice for trade policy

Institutional weaknesses: gaps in undertaking trade policies and policy making; weak public admin and facilities for business environment

Weak CSOs: limited CSOs influence in trade-policy making and claiming the rights of consumers

LDCs and the DDALDCs and the DDAWhat Steps for the Doha Round? What Steps for the Doha Round?

The DDA must deliver the following Development Prerequisites for LDC/EACDevelopment Prerequisites for LDC/EAC::

1. Favourable Market Access Regimes (Doha, EPAs, regional, etc.)

2. Development assistance targeted to enhance growth and trade

i. Improve competitivenessii. Improve ability to meet standardsiii. Improve institutional capacity to engage in trade

negotiations and implement the outcomesiv. Address poverty reduction by ensuring that the

needs of marginalized producers and groups within countries are taken into account and that impoverished and isolated segments of these economies benefit from expanded trade opportunities.

AfT: Major Shortcomings to be Addressed

Global Level:1. Failure to rationalize and prioritize the kind of

activities to be supported, and to mobilize the resources needed for them to be effectively executed. As a result, minimal resources have been spread wafer-thin over countless activities, most with an unverified connection to the ultimate objective. For example, the IF, over the last eight years, covering some 30 LDCs, was allocated only $30 million.

2. A near total lack of bona fide coordination among donors. Virtually every international organization and every OECD country has gotten into the act, apparently with little or no concern for coherence, consistency, efficient management, or cost and development effectiveness. Direct aid to the production and export processes is rarely found.

AfT: Major Shortcomings to be Addressed

Global Level:3. A lack of concern for measurable results.

Recent events point to progress in this area: Enhanced IF Paris Declaration principles OECD 2006 methodology for conducting ex-ante

poverty impact assessment to maximize the poverty reducing impacts of development interventions

AfT: Major Shortcomings to be Addressed

Domestic Level Aid for Trade has concentrated on ‘getting

the plumbing right’ on the premise that benefits trickle-down:

◦ that those employed in small-scale agriculture, in rural areas, and/or in the informal sector will at some point be in a position to take advantage of any trade benefits that do open up.

Challenge with this approach is that, ◦ the linkages between export-oriented activities

and the rest of the economy are not automatic.◦ Most jobs and livelihoods in these countries are

not export-oriented. The danger is that export expansion will not be broad-based, leading to enclave growths.

Prioritisation of AfT

In EAC, there are two major types of enterprises:

◦ a few large-scale enterprises, either domestically or foreign-owned, which have commercially viable assets, which provide regular full-time jobs for skilled labour, and which are linked with global markets.

◦ a mass of micro and small enterprises in which the majority of the unskilled labour is employed in informal ways, including casual wage labour. These enterprises are generally oriented to the domestic market, providing services or producing goods which are affordable for the poor.

Prioritisation of AfT If producers in the second enterprise are to take

part in more formalized economic activities, they require targeted and sustained support to help households ‘make the switch’

◦ Extension services, access to credit, and investments in infrastructure (especially roads and water).

These must be supplemented by wider Aid for Trade

◦ For improvements in ports, customs, regulatory capacity, access to finance, telecoms and power and business services

◦ Building capacity of this group to articulate and prioritize their own concerns into immediate and longer-term needs clearly to governments and donor groups.

◦ Producer groups and organizations representing the interests of the rural poor and the informal economy must be included in consultations, with a view to bringing them in more fully to the market economy.

Need for Export-Led Poverty Reduction Progamme:

With 2 main pillars: ◦ development of the entrepreneurial capacity of

the poor with regard to exporting; and ◦ linking that capacity to proven export market

opportunities. To focus mainly on 5 sectors:

◦ Agricultural products (fresh and processed)◦ Textiles (fibres and clothing)◦ Animal skins leather and leather goods◦ Light manufacturing◦ Community-based tourism

Prioritisation of AfT

THANK YOU!