TRALAC - Trade Law Centre

Subsidies, Preferences Could Set Back AGOA Gains, says Trade Minister

Wednesday, 23 July 2003

Source: AllAfrica.com

African countries had high expectations that the next World Trade Organization ministerial meeting in September would be the culmination of a "development round" of talks focused on establishing new trade regulations that benefit developing countries. But the WTO talks have stalemated in disputes between Europe and the U.S.

"On none of the issues of concern to the developing countries has there been any progress," says the Mauritius Minister of Industry and International Trade, Jaya Cuttaree. One month before the WTO meeting is scheduled to open in Cancún, Mexico, key issues such as lifting agricultural subsidies that punish African agriculture in particular or easing protections for intellectual property rights which affects the supply of drugs to HIV/Aids-stricken regions that are largely in Africa remain unresolved.

These issues are particularly complex for Mauritius because it has a higher level of per capita income than many African countries and benefits from some established bilateral trade arrangements with Europe. For instance, Mauritius sells sugar at a subsidized price in Europe similar to the price paid to French farmers. "The whole elimination of subsidies will hurt us very badly," explains Cuttaree in an interview with AllAfrica.

Mauritius is an example of both problems and possibilities as the developed and developing world struggle to find a way to change relationships that have largely benefited rich nations like the United States. Agoa, and other agreements like the Cotonou pact between Africa and the EU, which give some African products preferential treatment have been steps in the right direction, says Cuttaree. But he, like many of his African counterparts, worries that they are under threat of revision or elimination now. "The proposed modalities (at the WTO) would erode completely the margin of trade preferences, making both the Cotonou Agreement and the Agoa empty shells," Cuttaree said. He spoke to allAfrica.com's Charles Cobb Jr. and Akwe Amosu. Excerpts:

The Agoa trade preferences for Africa expire in 2008. There seems to be a consensus at least on the extension of Agoa, although there is some discussion of how long of an extension there should be - we'd like your view on that. Secondly, there is this question of origin of fabrics that seems to be a real sticking point in the discussions.

Well, Agoa is a trade and opportunity act, it has been a good act for Africa. As you know, at the trade forum in Mauritius in January, through a video message, the [U.S.] President announced that he was going to ask Congress to renew, to extend Agoa. So we are expecting that this will be accepted and we will have an Agoa to 2015.

Now, I think we all know it is a good thing, but I think it is also important to see Agoa within the context of the international trade rules which are in evolution at the level of the WTO, and the policy of the United States to sign treaty agreements with some regional groupings. Agoa is good for Africa, because it is based on trade preferences, market access, no quotas, no duties. Now, if these preferences go, in these stages or in a few years, I fear that many African countries will not be able to compete on the American market, and this is the big problem.

Do you really expect those preferences to go?

Well, if one were to judge by the proposals that were made last year by the American administration, I think it was in December or November, mainly to make the United States of America a duty free shop by 2015 with a rapid elimination of tariffs by 2010, well that is a very short period for the elimination of tariffs from the high of 100% down to 5%... and I think if this proposal were accepted it would be disastrous for countries like ours.

Because of competition?

Obviously, we already see the competition on the American market. As we are reaching 2005 already some countries are taking huge shares of the market and I think ultimately this will displace African firms from this market.

To what extent is this a bilateral discussion with the United States, or a multi-lateral discussion in terms of the issues lodged in the WTO Doha round of talks around agricultural subsidies and other barriers to African trade?

Although we say that the WTO is member-driven, we know that the two big blocs which decide to a large extent what happens, are the European Union and the United States of America. This is why we have to talk bilaterally to the United States and the European Trade Commission, to make our views felt. Because we think that the United States is committed to the development of the African continent and I think they would understand our qualms about the tariff proposals. Because you can't say, 'okay, we want world trade with Africa' when Africa doesn't have the ability to compete on a level playing field. We need preferences, we can't recognize this truth and at the same time propose tariff measures that would eliminate these advantages to the continent.

I terms of Agoa, would we be right in saying that Mauritius and perhaps Africa in general wants a kind of open-ended extension of the trade benefits? Is that what you're lobbying for, or what?

I think one has to be realistic. I always take the example of football teams. You have various divisions: division 1, division 2, division 3, 4 - I say that we in Africa are in the 4th division, but we aspire to get to the first division.

You have to give us time to adapt to that. How much time? It depends on how much investment we get, how much training we have, and this to a large extent is in the hands of the developed countries.

There is a provision in the current Agoa law that states, with some exceptions, that by next year all African countries will have to use yarn and fabric made in Africa or imported from the United States for any garments exported to the United States. How critical to the proposals for so-called "Agoa 3" legislation now being discussed in the U.S. Congress is the very specific issue of extending the provision that exempts certain poorer countries from the 'fabric of origin' rule? How worried are you about the way that works to block the access some countries have to the U.S. and gives access to other countries?

No, I don't think the intention was to block some countries. I mean, you know that when this bill was passed in May, 2000 there was this special provision for the LDCs [less developed countries] because it was felt that [even] if the objective is to have an integrated apparel industry within Africa to give value to the raw materials like cotton, nevertheless many countries would not be able to compete because they didn't have the capacity to produce the raw material. So this was why the criterion was used, namely the income per capita of $1,500, which excluded us and South Africa.

So, from that point of view this has not been to our advantage, we've tried to survive within this, I mean we didn't complain because everyone realized that you have special and differential treatment for poorer countries, we accept that principle, and even when we had these provisions to extend these facilities to Namibia and Botswana, we didn't complain because we realize that these countries have special problems which we do not have.

But now that the question of the extension of this provision is on the table, we are saying "Okay why exclude us?"

You mean why exclude Mauritius? Or middle income countries in general?

No, on the continent one has to know that it is us, South Africa, and Gabon that are not benefiting, but Gabon does not have a sizeable textile and garment industry. South Africa is a big country with an integrated industry, they have their own fabric and yarn, and in fact we try to buy it from them, but it is very difficult to get it from them because they need it for their own industry. In fact, the only country left out is Mauritius. I mean we might have a higher income per capita, but as we all know we are a very vulnerable country. We don't have the capacity to develop a local industry on our markets, to get our own country market, and it is very difficult for us to compete on the American market, against countries like China.

If the American industry cannot compete, it is very difficult for countries like ours to do so. This is why there is a unanimity on the continent for an extension, an open-ended extension, for a few years to allow the spinning industry to develop in Africa; in fact, this is the strategy of the Mauritian government, to develop a spinning yarn and fabric industry in Mauritius, become the hub of the textile industry in Africa. We would produce sufficiently to provide the continent with African yarn and African fabric. At that time you would not need the extension.

Not only for us, but we think for other countries like South Africa, Zambia, and Lesotho will attract investment for the development of this support industry. But as of now, they can't do it, so that is why they are asking for this extension.

To 2015?

The [U.S.] Administration is talking about an extension of two or three years; there is opposition in Congress, and the American industry is divided. So we don't really know what is going to happen.

What would you like to see happen?

I would like it to be extended for a couple of years, and I would like Mauritius to benefit because of that. This is a fair proposal, because we will benefit, and this will give time for African countries to develop their fabric and yarn.

The issue of subsidies that handicap African agriculture trade, and the issue of patents are going to be at the center of much of the discussion at Cancun. We have a situation in which the United States seems to be arguing with Europe on the lifting of agricultural subsidies, with Europe arguing with the United States to ease patent protections and intellectual properties, and both sides deadlocked. What could get this discussion off the ground in a way that is beneficial to Africa?

On this issue of intellectual property, I think you're talking essentially about Trips (the WTO's Agreement on Trade-Related Aspects of Intellectual Property Rights) access to medicine. It is very sad that we are bogged down by this issue. The problem is that, in the meantime, so many people are going to be infected and dying of diseases like Aids, Malaria, or Tuberculosis... [it's sad] that this whole issue is bogged down by commercial interests in countries with the capacity to produce this medicine.

I'm not talking only about America but there are so many countries in the fray for a bit of the cake. But I think we'll have to sort out this issue on a political basis, but I don't really know, because early this year in Geneva people thought we would be getting an agreement on that, but all the deadlines are being missed.

Do you think you'll reach some kind of an agreement in Cancun?

Well I hope this issue doesn't have to go to Cancun, because in Cancun [it would have to be decided in] a trade-off and I would think it would be very poor, very bad for the international community if the issue of medicine for the poor became an issue which can be traded.

There's no sign anywhere else that there is any movement on this issue, is there?

Well, let's wait another three months and we will see.

And the agricultural issue?

Well, this issue has been on the table for a long time. The vast majority of African countries feel that if market access is given to them, they will be able to export, and market access is through removal of subsidies.

But we, as Mauritius, don't necessarily support this position. As you know we sell most of our products, especially sugar, under preferential agreement to Europe and the price we get is the subsidized price, which is the price paid to the French farmers. The whole elimination of subsidies will hurt us very badly, and we'll be talking to the Commission about that.

But, parallel to this issue of subsidies, one has to look at the capacity to produce. I mean agricultural products are not like shirts. To be able to export you need to have roads, standardization, sanitary and phyto-sanitary standards, you need to have cool houses, you need to have ports. In Africa the only country that is being that successful is South Africa.

When you are talking about that, subsidies are an issue, but I think Africa, when we go into this battle, may forget about the other issues. What I fear is that there is a danger -just like with the elimination of quotas on textiles. This was supposed to open markets to developing countries, but what we have seen today is that the opening of markets as a result of the dismantling of quotas is going to benefit a few countries only, and the vast majority of African countries will be displaced from markets that they already have.

So this is my concern with the question of subsidies. We have to be very careful that large countries with the capacity to produce - middle countries - do not take the share of this market which we think that African developing countries will get.

How is this issue is going to sort itself out? There was a meeting a few days back and this issue was discussed but there is still deadlock between the States and Europe on that. Whether, again, there is going to be trade-off on this issue at Cancun, it is too early to tell.

Between now and Cancun, what would be the key place or arena to look at? Where would you see this issue being wrestled over? In bilateral negotiations?

As I already said before, I think bilateral negotiations or discussions are extremely important because the WTO member-states take the decision, and I think you have to create a coalition of interest, on issues that are of interest to you. And on this issue of subsidies, obviously, Africa has a position. And this position is going to be discussed with the Europeans and the Americans. What we come out with, finally, is difficult [to say], but I think the Europeans and the Americans, to me, are the key people on this issue. If they agree, you'll have a deal.

If they agree with each other?

That's right. I don't think that every single country can be a deal breaker, I think that in international politics this is not so.

But there is more than one group at the table. Can you say something about the effectiveness of the G-77 and the AU and the coalitions in which you as a country would be represented? Is that not also a voice at the table that has some impact?

Yes, we have an African position, which is going to be put in at the level of the ACP - the African Caribbean Pacific -

I was wondering whether, if Europe and the US agreed on a strategy that wasn't necessarily comfortable for the Africans, whether you would still say "if those two agree you'll have a deal."

If you look at the ACP group, it is the largest group of countries at the level of the WTO. Therefore, theoretically, we should be able to dictate what happens at the WTO. If you look, for example, at the association of new Europe and the ACP, it represents two-thirds of the membership of the WTO. But there are so many issues involved in these negotiations, that at the end of the day there is a trade-off.

But what is unfortunate - I think I can tell you about that because we just had a trade ministers meeting in Mauritius of the African Union ministers meeting - what is sad is the bitterness which is there, latent in all discussions of trade because so many of us feel that Cancun was supposed to be the development round. But on none of the issues of concern to the developing countries has there been any progress.

You look at the international press, the discussions are focusing on agriculture essentially. This problem of TRIPS, of access to medicine, is there because is a humanitarian problem, it is not an economic problem, it is not a trade issue, it's not an economic problem. But this was put on the table to get an agreement, this idea of a development round was to show to the African countries especially, 'okay, we're all trading partners but we feel also for your development, because if you don't have a process of development you won't be able to trade.' So, this was what made us feel very good after Doha.

But when you see the development in Geneva, I think there is enough to make you feel like at the end of this game you are going to feel like a victim, like you have been taken for granted all along, and that is very sad.

Tourism in some African countries is really suffering from the whole terrorism problem. Is Mauritius catching that cold?

No, not up to now. We are concerned that terrorism can be devastating to the tourism industry. We are taking all the precautions we can, and I think, as people say, this is where you can have heaven in paradise, that's H-A-V-E-N!

But perhaps it doesn't really matter whether there is a terrorist action in Mauritius - perhaps the attacks in Kenya are enough to put tourists off the whole of East Africa?

Well some people say that when you have problems like this in other countries there is a displacement of tourists to Mauritius, but I think one should look beyond that. Generally, if you have terrorism people are frightened, they don't want to travel, and that effects countries like ours which is so far away.

The BBC reported recently that Mauritius was considering using genetic technology to bring the Dodo back to life as a tourism attraction! Can you comment?

Well we've got so many attractions, one more or less doesn't make any difference!