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WTO conference key to growth prospects

COMMENTARY
By Benard Ayieko | December 14th 2015

Exit the Holy Father, enter the World Trade Organisation 10th Ministerial Conference (MC10). To crown it all, Nairobi will host the Tokyo International Conference on African Development and the XIV conference of the United Nations Conference on Trade and Development, which had earlier been scheduled for Lima, Peru.

The latter brings together more than 7,500 delegates who could inject over $40 million into the Kenyan economy. The MC10 outcome bears the greatest impact on African economies. WTO’s core mandate is to deal with rules of trade between nations by helping producers of goods and services, exporters and importers conduct their business of trade fairly in global markets that consist of rich and poor nations.

Rich nations stand accused of offering export subsidies and domestic support to their farmers resulting in large crop surpluses and downward pressure on food prices. The effect of these subsidies is that they lead to flooding of global markets with below-cost commodities, which depress prices and undercut producers, the indefatigable smallholder farmers in poor countries.

Matters are made worse by the fact that some of those domestic and export subsidies advanced by the developed countries target crops which are at the core of the agricultural sector in poor countries.

Last month, North Rift farmers sought the attention of Deputy President William Ruto on the low maize prices by the National Cereals and Produce Board (NCPB). They demanded a price of Sh3,300 per 90kg bag against Sh2,300 being offered by the NCPB because of high costs of production. The impact of trade-distorting subsidies on African countries has led to a nosedive in agricultural production. In most cases small farmers who relied heavily on cereal, cotton, poultry and dairy farming have gone out of business. Kenya’s erstwhile cotton ginneries are no more.

This is the cry of most farmers in the Least Developed Countries (LDCs). These are the trade-distorting subsidies that poor nations want corrected at the WTO’s 10th Ministerial Conference. We can therefore deduce that the role of agriculture in multilateral trading system discussions is too big to be underestimated.

It is probably the main reason why the 15-year-old Doha Round of Negotiations has not delivered the ‘African dream’ on the export-trade driven development. The ‘agricultural route’ remains the best approach to unlock the current impasse because the subject resonates well with African countries. Agriculture is the cornerstone of African economies contributing significantly to food security, export earnings, GDP growth, employment opportunities and rural development.

Most agricultural products are the main source of raw materials for industries. Therefore, any process that scuttles the growth of the agricultural sector has a negative impact on Africa’s dreams of industrialisation. Slow growth in agricultural production and persistent annual fluctuations in output continue to be a chronic problem. This poor performance of the agricultural sector in most African countries is as a result of internal and external challenges, which are part of the WTO’s core function that the MC10 should address.

The Doha Round, currently perceived to be under euthanasia, aimed at lowering trade barriers and to systematically correct the multilateral trading system to make it more relevant to African economies by placing their needs and interests at the heart of the Doha Work Programme.

However, hours to the MC10, there are fears that the current state of play reflects a major departure from the original promises of the Doha Development Agenda (DDA) and expectations of African countries. Recently, agricultural exporting countries like Argentina, New Zealand, Paraguay, Peru and Uruguay joined hands to propose tighter WTO rules on export subsidies and similar measures raising pressure on US to make concessions on export credits and food aid.

India has said it does not want to discuss new issues related to labour, environment and investment unless the existing ones related to agriculture, subsidies and the continuation of DDA are resolved. Even though this position resonates well with the aspirations of many African countries, the continued classification of China, India and Brazil as developing countries remains divisive.

This classification certainly gives African countries undue competition if they are given preferential treatment. The backstopping of African, Caribbean and Pacific (ACP) trade ministers by Kenya’s Foreign Affairs and International Trade Cabinet Secretary Amina Mohammed in ‘The Road to Nairobi’, not only signifies the significance of the MC10 outcome, but also the need for ACP countries to speak in unison and lobby for greater transparency on trade policies with the spotlight on micro, small and medium-sized enterprises known to be the key drivers of economic growth and development in Africa.

By approaching trade issues with one voice, African countries will deepen regional integration by adopting basic trading principles that are key to fostering intra-African trade.

Let us make trade happen so that Africa can reap the full benefits of WTO.

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