Conference of Chairmen of the Foreign Affairs (Development Cooperation) Committees

Speech by Minister for Trade and Commerce Mr. Michael Ahern T.D., At the Conference of Chairmen of the Foreign Affairs (Development Cooperation) Committees of the Parliaments of Member States and the European ParliamentOn Monday, 24^thMay in Dublin Castle

Policies pursued in the context of Overseas Development Aid, Trade and Debt, constitute an important set of cross-cutting measures, which underpin economic and social policy objectives. Policies pursued in these core areas are aimed at assisting developing countries, and particularly the poorest and most vulnerable, to meet their development goals.

My address to you here today will focus on these aspects and, in particular, on recent multilateral trade policy initiatives by the EU in the context of the Doha Development Agenda, and on recent developments in respect of ODA and Debt.

Trade and Investment commitments offer great opportunities for fostering economic growth, which can be to the benefit of developing countries. The World Bank estimates that the gains from a successful conclusion of the Doha Development Round of trade negotiations, involving freer access to developed country markets and the removal of price depressing subsidies on developed country products, would be in the order of an additional $350 billion per annum in income for developing countries by 2015, equivalent to approximately seven times the current level of total aid flows.

The realization of these benefits for developing countries, though, is by no means a forgone conclusion. The world’s poorest countries have not always been able to benefit fully from the trade opportunities offered by the multilateral trading system. This does, of course, depend on the way that trade liberalization is undertaken internationally and within developing economies. Indeed the focus of the work done by the European Union since the launch of the Doha Development Agenda has been to ensure that the new Round fully supports development objectives.

Trade - Development is at centre of DDA

It is fair to say that developing countries – the G90 in particular – have so far been sceptical of the benefits that the DDA can bring to them - notably in terms of market access opening in sectors like agriculture. Most obviously, there has been concern over the impact of further multilateral trade opening on the preferential market access that some developing countries enjoy in a number of developed “northern” markets. Some developing countries have also expressed reservations about engaging in further liberalization, or of adopting stronger multilateral rules.

It is against this background that the EU Member States have sought to identify clearly what kinds of outcome will genuinely promote development. This has been determined following a period of internal reflection conducted by the EU Member States, European Parliament, Council and Commission, following the failure in Cancun.

It is useful to recap here on the key elements of the conclusions drawn by the EU and the way forward - as the EU see it. These are sited in the basic principles which underpin the EU trade policy approach; firstly, that the WTO must remain the principal forum for trade opening and the strengthening of trade rules, and that the multilateral approach to co-operation on trade matters remains the most effective and legitimate means to manage the globalization and trade relations between countries.

The First key conclusion was that, a more serious focus should be placed on finding solutions to the problems experienced by the most vulnerable Members of the WTO – the Least Developed Countries, small economies, landlocked developing countries and any others particularly vulnerable to economic shocks or with particularly weak economies or infrastructure, or who remain highly dependent on preferential access and revenues from tariffs. These Members are in the greatest need of flexibility in the application of WTO rules, of development aid to remedy supply side weaknesses, and of measures to improve their access to markets. Work here should be guided by the principle, embodied in the WTO rules, that as Members develop, they move into a position to assume greater commitments and make a greater contribution to the multilateral system.

Nor should these commitments be seen merely in terms of mercantilistic exchange with developed countries. There is no reason, for instance, why at least the more robust developing economies should not extend to other developing countries tariff preferences, or extend to Least Developed Countries duty and quota free treatment. Thus the G20 group of countries could be invited to consider what preferences they are ready to extend to the G90 countries. Such improved access, together with support for supply-side reforms will mitigate the impact, if any, of reductions in margins of preference brought about by further multilateral trade liberalisation.

To take an example, given that 70% of the trade of developing countries is in industrial products and that they raise the highest barriers between themselves, important trade and development benefits will only be found if there is serious market opening within the developing world, particularly on the part of the more advanced developing economies, who are perfectly able to make a meaningful contribution. Indeed, the concern of several weaker developing countries about the impact of preference erosion can to a considerable extent be mitigated through the creation of new markets for their goods in the South.

Second, as regards the negotiation of greater flexibility for developing countries in the application of WTO rules – which is the core of the SDT work programme – the EU should only support the principle of permanent waivers or exemptions from basic WTO provisions in exceptional cases, limited to the LDCs and other similarly weak Members of the organisation, and where this helps, rather than hampers, development.

Last but not least, it is not enough that the EU and Member States re-affirm their strong commitment – political and financial – to trade-related assistance and capacity building, in the WTO and elsewhere. This is an obviously necessary condition, but far from a sufficient one.

The WTO Technical Assistance programme has suffered from a number of teething problems, from a mismatch between the financial resources committed by WTO Members and the organisational and human resources capacity of the WTO itself to implement it, as well as from insufficiently clear political guidance from WTO Members as to the strategic direction of the programme.

These are the guiding principles that the EU has set itself in the conduct of its DDA negotiations under the current trade Round and this is the context for the recent substantial initiative by the EU with the issue, on 9 May, of a joint letter from Commissioners’ Lamy and Fischler aimed at the re-launch of the DDA negotiations. In it, the Union sets out what it sees as the key areas where movement is needed in order for the EU, under the stated circumstances, to agree on framework modalities to help re-launch the DDA negotiations. This very important initiative concentrates on a small number of core areas - Agriculture, NAMA, Singapore Issues and Development.

This initiative underpins the reality that the EU is committed to work hard to secure genuinely pro-development outcomes in all areas of the Doha work programme. In terms of a focus on development, the EU propose that on the basis of an overall balance within and between the three main pillars in Agriculture, the EU are ready to move on the elimination of the most trade-distorting supports with its proposal to eliminate exports supports in respect of all Agricultural products. In addition, the least developed countries and other weak or vulnerable developing countries in a similar situation should not have to open their markets beyond their existing commitments, and should be able to benefit from increased market access offered by both developed and advanced developing countries.

This cannot be regarded however, as a unilateral and free gesture on the part of the EU. As clearly stated by Commissioners’ Lamy and Fischler, movement on the EUs part must be accompanied by strong reciprocal action by other WTO partners, if we are to maintain the positive momentum now in place and to build to a successful conclusion of the DDA negotiations.

This initiative shows the flexibility inherent in the EU approach, which aims to kick-start the DDA negotiations while at the same time protecting the interests of developing countries and particularly, the poorest and least developed. The EU is working hard to secure genuinely pro-development outcomes in all areas of the Doha work programme in line with the stress placed on this aspect in recent Council of Ministers’ Conclusions.

However, we must be clear here. The EU must ensure that the concept of “less than full reciprocity” does not equate to non-participation of developing country Members in the liberalisation process, but instead reflects the genuine capacity of Members at different levels of development to contribute. As to the question of erosion of preferences more generally, while there is no easy solution, developed WTO Members should at the very least pursue some of the EU examples, such as duty and quota free access for Least Developed Countries’ exports or at least minimum overall access for developing countries’ exports.

3. Debt - Developing Country Debt

Turning to developing country debt I would like to acknowledge the positive impact of the Highly Indebted Poor Countries initiative in reducing the debt burden of some of the poorest countries.

The EU has been a strong supporter of this initiative through the full participation of the Commission and Member States in funding HIPC multilateral debt relief and in providing bilateral debt relief within the terms of the initiative. Many member states have also provided additional support by cancelling 100% of their bilateral debt to HIPCs.

It is clear now, however, that the HIPC initiative will not provide the “sustainable exit from debt overhang” that was its objective. A number of countries that have completed the HIPC process and obtained the prescribed levels of relief are still encountering problems of rapid growth in debt, both external and internal. Many countries still in the initiative are facing similar problems. Ireland believes that the HIPC process is inadequate and that its definition of debt sustainability should be reviewed.

We have also supported the objective of total debt cancellation for HIPC countries committed to good governance and sound economic management. We have, however, emphasised that such debt cancellation should be funded through additional donor funding and would require a sharp increase in current levels of ODA from the major economies.

The experience of HIPC has taught us that it is not only the amount of debt relief that is important but also the way in which it is delivered and funded. A significant proportion of the funding of recent debt relief, including some HIPC relief, has not been funded in addition to existing aid. In some cases the funding of debt relief to HIPC countries has been at the cost of reducing aid flows to the same countries. So while relief has been made available other resource flows have not been maintained. This has meant that the debt relief granted has not in all cases resulted in an increase in resources for poverty reducing public expenditure. As a result Governments may well feel constrained to try to contract new borrowing in order to meet the expectations created around the HIPC initiative.

• Long-term debt sustainability will continue to be an issue and a challenge long after the HIPC process has been completed. The work on developing a framework for long-term debt sustainability currently being undertaken by the World Bank and IMF is very welcome. It is appropriate that these institutions and other Multilateral Development Banks should develop systems and procedures to protect their portfolios and to ensure that the prudent nature of their lending. After all the debt crisis that we have witnessed was not the result exclusively of inappropriate borrowing and expenditure.
• Nevertheless debt sustainability in a given country must be the primary responsibility of that country. In addition, therefore, to what is already being done we need we need to work with borrowing countries to help them develop and implement appropriate policies and strategies at-country level for the prudent and sustainable management of debt and development financing in general.

AID – Our ODA levels and how they comply with MDGs

Debt sustainability is of course linked to overall financing for development. The IFIs have been unequivocal in stating that for many poor countries debt sustainability and any significant progress towards the Millennium Development Goals can only be achieved if there are significant real increases in grant ODA. The World Bank last September in Dubai also stated that due to progress in developing countries on policy and institutional reform, the environment for development expenditure has never been more favourable. They estimate that an immediate 30% increase in aid flows could be absorbed by developing countries without any significant drop in effectiveness.

Ireland has increased its ODA sharply over the past four years. We feel that this is the most important way to help developing countries meet the challenges of reaching the MDGs and of achieving debt sustainability. It is also an important part of fulfilling our commitment to the global partnership for development and a recognition of our developing country partners to do the same. We urge other donor countries to concentrate their efforts on finding ways to deliver real and sustained increases in development assistance.

MDGs – “Stocktaking” for 2005 Monterrey Conference.

The General Affairs and External Relations Council held a recent debate, chaired by my colleague Tom Kitt, on the implementation of the eight commitments made by Member States in preparation for the 2005 Monterrey Conference on International Financing for Development, particularly in the area of aid volumes and the harmonisation of aid practices. The Council noted that the Union was on track to exceed its commitment to achieve the collective target for increasing the volume of ODA by 2006, and underlined the importance of increasing ODA volumes in order to meet the MDGs. The Council also agreed on the need to take further concrete steps to improve donor coordination and harmonisation.

Along with the assessment of the Monterrey commitments, the Council agreed to an Irish Presidency initiative to give the Commission a mandate to coordinate an EU input to the 2005 Review of the MDGs. In this way, the EU intends to give a lead in international stocktaking of the MDGs and to push this vital exercise to the top of the international agenda.

The format of the national MDG reports, which will be used as the basis for the EU’s input to the 2005 event is still under discussion. The Commission has prepared a draft, which is being worked on. The national reports will be heavily, but not exclusively, focussed on MDG 8 - “global partnership for sustainable development” which is the MDG most relevant to donors.

Conclusion

I believe that the EU, as one of the most significant international players in the area of development assistance, has both a responsibility to help relieve the suffering caused by poverty, and the means to promote poverty eradication at a global level.

I have highlighted some of the guiding principles that underpin the achievement of the development goals inherent in the conclusion of a successful multilateral trade round to the mutual benefit of all concerned. We are all aware of the important recent initiative of the EU to re-launch the stalled DDA negotiations, which is consistent with the overall strategic goal of placing development to the fore in the current Round.

I see a future for EU development policy which would involve rising levels of official development assistance, with a greater share going to the poorest countries where it can have most impact, and supported by a set of coherent EU policies. We must ensure that the new enlarged EU is a strong and effective player in international fora, capable of facilitating dialogue on key issues on the global economic and social agenda.

I believe that EU achievements so far have made a very worthwhile contribution towards providing a solid foundation in order that we can reach these goals.

ENDS/TC 100