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WTO’s New Trade Rules will Give Businesses a Helping Hand

18 December 2013   (0 Comments)
Posted by: Author: Jana Marais
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Author: Jana Marais (BDlive)

South African businesses will benefit from more efficient customs processes, increased transparency and less red tape at ports thanks to a historic agreement reached by members of the World Trade Organisation (WTO) in Bali last weekend.

The deal, the first major multilateral agreement since the WTO was established in 1995, includes only a limited number of issues from the broader Doha Development Agenda, which has been dragging on since 2001.

Reaching some agreement was seen as important to restore confidence in the WTO, whose rules and dispute settlement mechanism in particular is seen as crucial to govern trade.

In addition to cutting red tape at customs, reducing scope for corruption and speeding up port clearance, members agreed in Bali to reduce agricultural export subsidies and obstacles to trade when agricultural products are imported through quotas, and to improve market access for least developed countries, the WTO said.

A temporary deal was also reached to allow India, a key negotiator in WTO talks, to maintain its public food stockpiling programme.

The food security programme is hugely important politically, but can lead to breaches of WTO rules, something members agreed to ignore for now.

Peter Draper, a senior research fellow at the South African Institute of International Affairs, said the biggest benefit for South African business would be the easing of customs processes on the continent.

"A lot of the work is already under way, but the agreement will provide an external impetus for these reforms, and may include some funding to implement the reforms,” he said.

The WTO calculates that the benefits to the world economy at somewhere between $400bn and $1-trillion, thanks to a reduction in the cost of trade of 10% to 15%, increasing trade flows and revenue collection, creating a stable business environment and attracting foreign investment.

For least developed countries (LDCs) like Lesotho and Mozambique, the deal will not change much.

Key issues for LDCs were the abolition of US cotton subsidies, which was always a nonstarter, and 100% duty and quota-free (DFQF) access to which the US Congress would never agree.

Besides, Lesotho doesn’t want 100% DFQF access for all LDCs because that would allow Bangladesh and Cambodia to export clothing duty-free to the US,” Mr Draper said.

Under the Africa Growth and Opportunity Act, Lesotho exports clothing duty-free to the US, giving it a competitive advantage over the Asian producers.

The key outstanding issues remain around agricultural and industrial tariffs as developing countries such as South Africa have been reluctant to cut industrial tariffs, at least not without significant improvements in agricultural market access to developed countries and regions like the US and European Union.

This article first appeared in Sunday Times: Business Times.


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