Round Table, Johannesburg: Minister Mandisi Mpahlwa
16 October 2007
At the outset, I would also want to extend a warm welcome to South Africa to
our friends from Brazil and India, including the business community from each
country.
The rationale for enhancing trade among the three countries is rooted in
longstanding and sound sets of arguments that call for enhancing South-South
economic integration and cooperation. These go back to the mid-1960s and have
been detailed in a great deal of political engagement and technical work,
particularly in the context of the work done by the United Nations Conference
on Trade and Development (UNCTAD), over many years.
The central argument is that by broadening economic space through larger
markets, developing country firms can achieve economies of scale and enhance
their competitiveness at the regional level as a platform to compete more
effectively on a global scale. Opening trade within the South serves the twin
purposes of assuring both positive trade and economic growth among developing
countries and facilitating their preparedness for trade openings at the global
level.
Improved competitiveness for firms from developing countries can also be
forged through cooperative arrangements in the critical areas of, amongst
others, transport, communication, and technology sharing for industrial
upgrading. South-South arrangements also offer greater possibilities to attract
FDI, and to pool economic, human, institutional, technological and
infrastructural resources. Finally, cooperation can contribute to building
solidarity among developing countries to assert their common development
aspirations in a range of multilateral forums.
Each of these elements is evident in the Joint Press Communiqué issued by
the IBSA Heads of State at the last Summit held in Brazil.
But beyond these traditional arguments, new developments in global trade
suggest the need to pursue South-South cooperation and integration with more
vigour. Recent analysis shows that over the last decade, developing countries
share of international trade has grown dramatically, accounting for around 30%
of world trade.
Almost all of this growth has been in trade among countries of the South,
with over 40 percent of developing country goods exports now destined for other
developing countries. Further, such trade is increasing at an annual rate of 11
percent (nearly twice the growth rate of total world exports). South-South
trade in services is also on the rise, offering substantial possibilities for
developing countries to diversify their goods-dominated export structure. These
processes are, of course uneven among developing countries, but the central
point of the growing importance of the South in global trade is clearly
evident.
A recent study by the Organisation for Economic Co-operation and Development
(OECD) observes that trade barriers affecting South-South trade are higher than
those affecting other trade: 11,1% on average, compared with 4,3% for
North-North trade. It follows therefore that reducing South-South tariff
barriers can have a major impact on trade flows. Overall, the OECD suggests
that, from a development point of view, South-South liberalisation is at least
as important as tariff-free market access to Northern markets.
Taken together, these arguments are at the centre of the idea of the
changing economic geography outlined by President Lula. It is important to note
that the focus on increased South-South trade should be seen as a complement to
rather than a substitute for North-South trade.
Turning more specifically to IBSA, our cooperation is also forged on the
basis of a common set of values of democracy, human rights and development. We
share a common understanding of importance of trade for development and to
address poverty and unemployment. It is a perspective that recognises that the
development process is complex and requires carefully calibrated policy
interventions. Our common approach to the global economy is one perhaps best
captured in the notion of "strategic integration" on terms and conditions that
promote our development objectives.
This may be best reflected in the shared views the IBSA countries hold with
respect to the multilateral rules-based system in the World Trade Organisation
(WTO). In this arena, we have consistently pursued a common agenda to
strengthen the trading system in a manner that redresses existing imbalances
and promotes development. In the current Doha Round, we have together pursued
four key negotiating outcomes:
First - new market access for developing country exports of goods and
services
Second - the removal of distortions in agricultural trade
Third - redress the design rules that prejudice the interests of developing
countries
Fourth - in the design of new rules, ensure there is sufficient flexibility to
pursue our development objectives.
These shared views have been manifest at a political, operational and
technical manner on most issues in the Doha Round but particularly in
agriculture and industrial tariff negotiations through our common membership in
the G20 and Non-Agricultural Market Access (NAMA) 11. The establishment of
these developing country groupings, in which IBSA countries have been at the
centre, is historic in the global trading system. It has shifted the
negotiating dynamic and ensured that the development objectives of the Round
are not eroded.
With respect to the challenges that confront us, the first point to make is
that Brazil, India and South Africa are comparatively large growing developing
economies, and pivotal in their respective regions. Collectively IBSA countries
working together can give new impetus to meaningful South-South
cooperation.
There are nevertheless several substantive and process related issues we
need to confront. In some respects, it may be easier to make progress in the
areas of cooperation that have been identified such as: transport,
communication, technology, energy etc. Useful cooperation in these areas is
already underway.
It is perhaps more difficult to make progress in tariff negotiations that
aim to broaden the economic space for our firms and industries. The reasons for
these difficulties are not hard to find. They relate to the fact that our
industrial development is still underway and, against the background of
widespread poverty, unemployment and a host of other development problems, it
is difficult to open markets that may place severe pressure on domestic
production and exacerbate unemployment. Indeed, the key issue is whether our
industrial and agricultural structures are complementary or directly
competitive with each other.
Given the sensitivities of our economic structures, it would be difficult to
envisage an agreement that covers substantially all trade, as set out in the
WTO rules. While a more limited preferential trade arrangement, covered by the
Enabling Clause in the WTO, would more appropriate, we would need to seek to
broaden the scope of an exchange of tariff preferences beyond the current level
of exchanges of preferences, if the trilateral trade arrangement is to be
meaningful. This, it seems to me, is the crux of the matter, and a challenge we
need to confront squarely.
IBSA has agreed to a way forward. We have established a Working Group to
undertake a study on the "modalities" that would aim to define a framework for
the envisaged trilateral arrangement. The Working Group composed of the
Southern African Customs Union (SACU), Mercosur and India (11 countries), will
"explore, define and reflect on the modalities/parameters for future trilateral
trade negotiations process". This work is vital.
On the modalities, it seems that, as compared to free trade agreements, more
limited preferential trade agreements allows for a more strategic integration
process among developing countries. This, perhaps, is the first point of
agreement. As tariff negotiations are both sensitive and at the heart of the
envisioned trilateral trade arrangement, we will need to initiate a process of
solid research and analysis so that we are able to demonstrate empirically to
each our domestic constituencies, the benefits of such an arrangement. This
will be essential to secure their support for the process. Such studies are
envisioned as part of the modalities.
As we acknowledge that tariffs are not always the most important barrier we
face in foreign markets, the modalities should include an approach that allows
us to deal more effectively with non-tariff barriers. We will also need to
consider whether other types of cooperative arrangements are viable. This may
include, for example, sectoral cooperation agreements, and mineral product
supply linked to investment in value added activities.
The final point is that IBSA countries generally accept that we must
strengthen existing bilateral agreements. These bilateral agreements will
determine the basis and starting point for our longer-term ambition. I am
pleased to note that the SACU-India PTA negotiations have commenced, and the
2nd phase of SACU-Mercosur PTA negotiations has been largely completed. I am
also pleased to note that a first trilateral discussion between SACU, India and
Mercosur has been held.
In sum, pursuing the trilateral trade arrangement in IBSA is compelling and
preparatory work is underway that will advance towards that objective.
Thank you
Issued by: Department of Trade and Industry
16 October 2007
Source: Department of Trade and Industry (http://www.thedti.gov.za)
