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January 20, 2019

What next after the WTO Nairobi package?

AS the curtains fall on the WTO 10th Ministerial Conference held in Nairobi last week, the much more important phase of implementation, how much of the talk will translate to growth in trade, remains to unfold for members.

The success of the multilateral trading system is very much dependent on how the systemic challenges posed by a heterogeneous membership with divergent needs, interests and priorities are balanced.

Issues relevant to the African continent and developing countries in general are also increasingly finding their way into the multilateral agenda, particularly because their economic future is more in trade than aid.

 The fundamental challenge for Kenya and other African and developing countries is to make certain that the expected benefits are tangible to the majority of their population that live below the poverty index.

A walk along the aisles of supermarkets in major towns reveals that the trade problem is real. Products from every corner of the globe have found a market in local shelves, ranging from processed baby food, chocolate, tomato sauces, fish, juices, toys, cereals; name it and you will find it.

Perhaps more puzzling is that some of these products are labelled in foreign languages that are not part of the local or national languages, while others carry promotional offers that are only redeemable within foreign locations.

That some of these products find their way through the borders into the high street supermarkets means our standards are indeed wanting.

Certainly, market liberalisation did not mean open doors to everything and anything and the Kenya Bureau of Standards has a significant role to play to ensure high standards are maintained.

 So while tomato sauce is crossing the oceans and seas from thousands of miles destined to Nairobi supermarkets, the small-scale tomato farmer from Kiambu, a walking distance from Nairobi is in Wakulima market selling his tomatoes at a throw away price to avoid the risk of rotting.

Perhaps the farmer in Nyahururu has abandoned his tomatoes at the roadside, because the buyer’s truck is stuck in the mud for lack of an all-weather access road.

While Lake Turkana is reputed to have plenty of fish, it is hardly to be found in Nairobi supermarkets, while imported fish is readily available. There are many examples, and the trend of importing goods for basic consumption is increasing at an alarming rate.

 That said, success from the WTO conference will depend on the level of preparedness of a country to exploit trade benefits and its ability to respond to new challenges.

The evidence on market access so far is that many developing countries are yet to build capacity to exploit the benefits by increasing exports and to counter the challenges created by increased imports to their domestic markets.

More significantly, the increasing market access by developed countries to developing countries is weakening the capacity of the developing countries to access both developed and other developing countries.

 Furthermore, past evidence shows that despite the obvious disadvantages and barriers that many developing countries face in increasing their participation in world trade, more than 80 per cent of them rarely utilise the dispute resolution mechanism that is part of the WTO.

Concerns that WTO’s dispute resolution mechanism is systematically biased against developing countries may also have legitimate basis, casting serious doubts on the relevance of WTO for developing countries.

 The Nairobi WTO conference achieved some notable wins for Africa, although most of them are for the Least Developed countries whose capacity to benefit from such wins are limited. Two of those wins are however worth of mention and more relevant for Kenya.

 First, the decision to reduce and eventually eliminate export subsidies for farmers in developed countries was described as the most significant outcome.

Although developed countries have committed to remove export subsidies, this commitment excludes some agricultural products. It will also require close monitoring to ensure that indirect means of subsidy are not introduced.

 Second, the elimination of tariffs on 201 information and communication technology products means that importation of these products will be cheaper.

 The removal of Tariffs covering 89 per cent of the 201 items traded by value will take place within three years and the remaining by 2024.

This is beneficial to Kenya, especially because ICT is a major driver of trade and development and future economic growth. This does not however address the prospects of African countries becoming exporters of IT products, making this an indirect benefit only.

 By and large, while the Nairobi package was hailed as historic and successful to some extend, it is clear that the path to more participation in the world trade will take more than well attended WTO Ministerial conferences.

African countries continue to face immense, multifaceted development challenges, and the window of opportunity offered by WTO is not sufficient to bring meaningful progress.

 When all is said and done, benefits of WTO will only materialise for African countries that draw their own “business plans” with clear development paths and clear follow through strategies. Eventually, Africa and not WTO will deliver for Africa.

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