Leaders at the G20 summit in Seoul are expected to place trade at the forefront of a new international development agenda, amid intense lobbying on behalf of the world’s poorest countries for quota-free and duty-free access to more developed markets.
Summit host South Korea is spearheading a push for leaders to adopt a new strategy to create sustainable economic growth for less developed countries (LDCs). Seoul sees trade as the most important part of its nine-pillar development agenda.
A draft communiqué on trade, drawn up at the end of October and seen by Emerging Markets, states that G20 nations will “agree to make concerted progress towards providing the least developed countries with full duty-free and quota-free access to our markets.”
“Putting trade issues at the forefront of the G20 development discussions is a big step forward”, said Homi Kharas, a senior fellow at the Brookings Institution.
Aid campaigners are lobbying G20 states to grant LDCs duty-free and quota-free (DFQF) access to developed markets. According to people familiar with the matter, the majority of the group’s middle to high-income nations are, in principle, sympathetic to the proposal, which would come at a relatively low cost.
The draft communiqué seeks to ensure advanced economies provide 100% productive coverage for LDCs. Since poor countries are typically small goods suppliers, adopting DFQF proposals would not lead to big jump in LDC imports relative to total imports for G20 nations.
But people close to the matter said hurdles remain: it is unclear whether the US will accept the proposal. Washington had previously insisted at a 2005 WTO meeting in Hong Kong on limiting DFQF market access to 97% to protect agricultural and clothing items – the bulk of LDCs’ exports.
Although that meeting also called on emerging economies to provide DFQF access to LDCs, no timetable was agreed for trade liberalization or product coverage ratios.
Lower-income G20 nations, principally China and India, may also be reluctant to agree to binding liberalization targets, as it exposes their domestic industries to competition, sources added.
The draft communiqué also suggests that emerging nations will either reiterate the need to provide DFQF by to LDCs, in line with vague Hong Kong commitments or agree a timetable for the adoption of the plan. Kimberley Ann Elliot, senior fellow at the Center for Global Development, a Washington-based think tank, said that 2015 is a realistic target for advanced developing economies – principally Brazil, Russia, India and China – to do so.
However, even if G20 nations agree to adopt trade liberalization measures, the agreement will lack teeth without reforms to preferential rules of origin that regulate much of LDCs’ exports to richer economies, Elliot said.
The draft document also reinforces the importance of an aid for trade policy for low income countries. But it makes clear that G20 commitments to maintain aid for trade at current levels beyond 2011 have not yet been agreed. The document notes that such policies should not be at the expense of traditional aid, such as education and health financing.
World Bank research notes that $1 of aid for trade spent on policy and regulatory reform could produce almost $700 in trade – a higher rate of return than on other aid investment.
The communiqué also calls on multilateral agencies, including the African Development Bank, to identify and report on barriers to regional trade integration in Africa at the G20’s summit in France next year.
Separately, pressure is mounting for the G20 to grant the African Union (AU) and its economic arm, New Partnership for Africa's Development (Nepad), permanent seats at the G20 table. To date, both have attended G20 summits at the discretion of the G20 chair.