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TRADE: Progress Towards South-South Tariff Cuts

Gustavo Capdevila

GENEVA, Dec 15 2006 (IPS) - A preliminary understanding reached by a bloc of 43 developing nations has opened the prospect of making significant cuts in trade tariffs among countries of the South.

"I think that there is a powerful trend towards accepting a formula for tariff cuts across the board, amounting to between 15 and 30 percent," said the head of Argentina&#39s negotiating mission, Alberto Dumont, who chaired the debates at the meeting of the Global System of Trade Preferences Among Developing Countries (GSTP) this week.

Dumont admitted that certain GSTP members "still had some difficulties with the idea," but said others are seeking "a technical solution that is perhaps even more ambitious."

For example, the Southern Common Market (Mercosur) delegation, represented here by Argentina Brazil, Paraguay and Uruguay, was pushing for tariff cuts of at least 30 percent. The range of cuts being discussed was between 15 and 50 percent, said Lakshmi Puri, chief of the trade division of the United Nations Conference on Trade and Development (UNCTAD). "So I suspect the final figure will settle somewhere in between," she said.

The definitive reduction in trade barriers between GSTP members will be confirmed at the bloc&#39s next meeting, in April 2007, Dumont told IPS.

The World Trade Organisation (WTO&#39s) Doha Round of talks, which have gone on fruitlessly for nearly five years, have discussed tariff rebates, for example in agricultural trade, that would amount to 39 percent, according to one interpretation of the proposal presented by the European Union.

Again in respect of agricultural markets, the United States is seeking reductions of between 60 and 90 percent in tariffs applied by industrialised countries.

However, the Group of 20 (G-20), a bloc of developing nations united by their reliance on agricultural trade, want a 54 percent cut in tariffs by the industrialised nations and only a 36 percent reduction on the part of countries of the South.

But Doha and the GSTP should not be looked at as interconnected processes, Puri told IPS.

The GSTP should be seen as complementary to Doha, but something that is happening independently and regardless of Doha, she stressed.

The GSTP was created in Belgrade, the capital of the former Yugoslavia, in 1988, and entered into force one year later. Participation is limited to developing countries that are members of the Group of 77 (G-77), the bloc which represents the nations of the South at the United Nations.

The founding members of GSTP were Algeria, Argentina, Bangladesh, Benin, Bolivia, Brazil, Cameroon, Chile, Colombia, Cuba, Ecuador, Egypt, Ghana, Guinea, Guyana, India, Indonesia, Iran, Iraq, Libya and Malaysia.

Further founder members were Mexico, Morocco, Mozambique, Burma (now Myanmar), Nicaragua, Nigeria, North Korea, Pakistan, Peru, the Philippines, Rumania, Singapore, South Korea, Sri Lanka, Tanzania, Thailand, Trinidad and Tobago, Tunisia, Venezuela, Vietnam and Zimbabwe.

The founding declaration conceived the GSTP as one of the main instruments for South-South cooperation, and made provision for sub-regional, regional or inter-regional associations of developing countries to participate as members of the system. The first such group of nations to join the GSTP was Mercosur, which completed the entry procedure, initiated in 2001, in October this year. Venezuela did not appear with the other members of Mercosur because it had not yet attained full membership of the bloc in October.

Meanwhile, nine other countries – Burkina Faso, Burundi, Haiti, Madagascar, Mauritania, Rwanda, Suriname, Uganda and Uruguay – have applied to join the GSTP as individual members, which entails a long process of negotiating concessions with the member countries.

The agreements achieved so far within the GSTP "have hardly any economic or commercial value," because the original mutual concessions made in 1988 were very limited, said an official negotiator who asked not to be named.

The second round of GSTP negotiations failed because they were eclipsed by the Uruguay Round (1986-1994) of the General Agreement on Tariffs and Trade (GATT), which preceded the WTO and incorporated agriculture, services and intellectual property into the multilateral trade talks.

The ongoing third round of GSTP negotiations was launched at the June 2004 UNCTAD conference in Sao Paulo, Brazil.

At the sessions held this week in Geneva, it became clear that there was "a strong common view that these negotiations must conclude before the end of 2007," Dumont said.

There is far greater convergence with regard to how the negotiations might be conducted, the diplomat said. "We have agreed on several points about the rules that are going to apply, so two undeniable advances have been made." The discussion was frank and open, which means that the positions are much clearer, the Argentine negotiator reported.

As the negotiations progress, international trade figures show that South-South commerce has grown at an accelerated pace in recent years.

"GSTP countries are an entity to be reckoned with in international trade. They have a certain place," said Puri.

"If you look at them collectively they accounted for 1.8 trillion dollars in exports plus 1.6 trillion in imports in 2005," she said. "Together, that&#39s 3.4 trillion dollars in terms of trade presence in the global market, which amounted to a total of 10 trillion dollars. So these GSTP countries accounted for more than one-third of global trade in 2005," Puri said.

GSTP countries&#39 exports account for 17.5 percent of the world total, and 48.7 percent of total exports from developing countries to the global market.

As for imports, the bloc buys 16 percent of the global total, and exactly half of developing countries&#39 imports from the rest of the world.

The UNCTAD official said the"GSTP includes countries which are very dynamic, both in terms of their own economic growth, and as regional big players emerging into the global arena of international trade."

"Among GSTP countries themselves, trade is considerable, worth 813 billion dollars in 2005, which represented over one-fifth of their total global trade," Puri said.

UNCTAD Secretary General Supachai Panitchpakdi interpreted these figures as indicating that "GSTP countries have emerged as significant players in world trade, and therefore have sufficient weight to drive a trade creation initiative such as this."