WTO advises Tanzania on gas wealth

PASCAL LAMY ON TANZANIA GAS:

‘Promote efficient, transparent and equitable awarding of extraction’

• Put in place transparent and equitable means of collecting royalties
  
• Ensure that the regulatory structure is sufficiently developed

World Trade Organisation director general PASCAL LAMY is set to retire next month. In an exclusive interview with The Citizen that was granted to our Correspondent BERNARD MAPALALA, Lamy discusses his most difficult moments as head of the WTO, the effect of tug of war between developed and emerging economies on Doha Round, his visits to Tanzania and meetings with President Jakaya Kikwete, and how Africa is destined to become the second China. During the interview, Lamy refuses to comment on allegations that he is eyeing the French presidency after his retirement from the WTO. Please read on…

Looking back over the years since you took over the stewardship of the World Trade Organization in 2005, how do you evaluate your performance?

It is a bit early to be speaking of my legacy. I will get to that next month. Let's also remember that the WTO Director-General is not the boss of the organization which remains "Member driven".  Hence it is not easy to distinguish between the DG and the organization itself to judge performance. 

But there are some important things that have been achieved during these eight years which bear mention. Among them would the accession of 11 countries into the WTO, from the biggest, Russia, to some of the smallest, Tonga and Vanuatu. We have greatly enhanced the surveillance and monitoring of trade policies, including measures taken since the advent of the economic crisis.

This has been a powerful tool in deterring governments from resorting to protectionist measures. Transparency and peer pressure -- through the WTO and the G-20 -- have helped politicians resist the sort of policies that certain special interests seek during times of economic duress. We have brought attention to the serious problem of dwindling trade finance for small countries, small banks and small companies and it is in this context that the African Development Bank has recently set up a trade finance facilitation programme. 

We have established strong WTO leadership as co-ordinator of the Aid for Trade programme. In 2010, financial commitments from donors reached $48 billion, which is up 82% from the baseline years of 2002-2005. Since the programme was launched in 2005 we have established sound, demand driven and needs based mechanisms for pinpointing how to address trade related bottlenecks and ensure that funds are precisely targeted to those needs.

By shining a light on this serious problem we have been able to mobilize international resources and persuade banks, wary of foreign lending since the crisis that trade finance is among the safest forms of banking and does not represent high risk. We have improved the quality of our analysis across the board, our publications are sharper and better, our internet site is one of the best in the business.

We have also reached agreement on a range of small but important rules-related issues in the fields of accession, services and intellectual property that are vital to our poorest members. We have kept a tight rein on our budget, while diversifying our Secretariat to bring greater regional and gender balance.

We have also made the WTO more environmentally friendly. It is true that we have not yet been able to deliver the big prize of the Doha Round and this is disappointing

As director general of the World Trade Organization, you must have experienced some tough situations and moments. Can you shed light on those moments?

I think the toughest was in July 2008 when we were so close to an agreement that would have concluded the Doha round. The meeting ran aground on technical issues that no one really foresaw going into that tough week of discussions.

We pushed, we cajoled, we tried to reassure and we worked through the night many nights in a row. But in the end, there was just a bit less political energy or trust between major players than we needed to bring the negotiations to a successful close.

You expected the year 2010 to be a turning point in clinching the Doha deal and laying the foundations of a safer global economy. What hindered the realization of that dream?

Two things really, one is the ongoing impact of the economic crisis. Trade flows have sagged sharply as overall demand has contracted. Trade volumes grew by only 2% last year and will grow but just over 3% this year. The recession that continues to grip Europe has brought about high unemployment. While growth in the US is a bit better, unemployment there remains unacceptably high. Japanese growth, while improving, remains below boom-time highs.

All of this means that the political appetite for further trade opening has dimmed. True, these countries seem keen to enhance trade among themselves through regional or bilateral arrangements but they remain reticent to expand trade globally with emerging countries like China, India and Brazil within the existing parameters of the WTO.

This leads me to a second big reason why the Doha round has stalled, the seismic geopolitical shift that has been underway for more than a decade. As power shifts west to east and north to south, those who have held power for so long seem reluctant to let go while those assuming power seem reluctant to shoulder fully the responsibilities that accompany this power.

In the WTO context this means that the US, EU, Japan are ever more reluctant to extend special treatment developing countries like China, Brazil and India because, in some sectors, they are world class competitors. This geopolitical tension manifests itself in other forums as well. I see some signs that this is easing, but it may take some years still before the time is ripe to conclude the Doha round.

There is a growing rift between developed and Third World countries as evidenced by sharp differences that occurred during the 8th Ministerial Meeting in Geneva. Developing countries alleged that plurilateral approaches were undermining the Doha mandate. Have sufficient efforts been made to narrow this rift before the 8th Ministerial Meeting takes place in Bali at the end of the year?

There is some consternation in some developing quarters about the rise of negotiations that are taking place outside of the confines of the WTO. Some of these negotiations are bilateral -- like the US-EU proposed Trans-Atlantic Trade and Investment Pact or the EU-Japan bilateral.

Some of them are regional like the Trans-Pacific Partnership(TPP) and the Regional Comprehensive Economic Partnership (RCEP). I would agree that a Doha deal would probably offer broader and deeper benefit than all of these accords combined. Not least because delivering real trade opening will require coherence among all these bilateral and regional initiatives.

But the plain fact is that we are not delivering in the Doha negotiations. We have, perhaps, one more chance to put the Doha round back on track and that is with we are aiming at negotiations on a limited number of issues by the WTO Bali Ministerial Conference in December.

By the time the 9th Ministerial Meeting takes place in Bali, you will already have handed over to your successor, Ambassador Roberto Azevêdo. How do you visualize the outcome of that meeting?

I would say that there is a 60% likelihood of success in Bali and I would say the current trend is favourable, although there is a great deal to be done and we will not get there unless we pick up the pace.

Remember that we are talking about something here which would constitute an accord comprised of only a chunk of the content of the overall Doha Development Agenda negotiations.

But the negotiations are far more important than this number would indicate because the WTO needs to prove that it can be a forum for delivering a negotiating success.

The substance of these proposed items for negotiations are not insignificant. By some calculations a deal on trade facilitation would deliver around 40% of the value of a deal on the entire Doha round. But unless we deliver in Bali,

it is difficult to imagine our being able to credibly pick up the remainder of the Doha negotiating agenda and carry on through to a conclusion. Thus the future of the WTO's negotiating function is very much on the line between now and the end of the Bali meeting.

You have visited Tanzania on several occasions, as you look back to those visits, what can you state at this precise moment?

It is a country of warm hospitality, unsurpassed beauty and great promise. I remember a great many things including my discussions with President Kikwete on everything from agriculture reform, to trade facilitation in the Port of Dar-es-Salaam.  I remember too an entrepreneurial spirit that is alive and well and embodied in the people of the country who only require the opportunity to succeed.

I think the future is bright for your country, provided it remains firmly engaged in moving the East African Community towards more trade, economic and political integration

You are an advocate of economic growth and trade that integrates social inclusion and environmental protection.  As Africa records a record FDI increase, and Tanzania and nine other African countries being forecast by the IMF as the world’s fastest growing economies in the coming decade, what advice do you offer for these countries on their high GDP/high poverty mismatch?

As Donald Kaberuka, the President of the African Development Bank said recently, African Governments still need to translate growth into greater social inclusion. 

But this is not exclusive of Africa, it is a challenge faced by many countries around the world today, developed as well as developing countries. The real key is education.

If you want to ensure the development of your economy and the most equitable allocation of national income, education must be available to the great majority of the citizens.

An educated workforce is a productive workforce and it is through productivity that real economic and developmental gains can be made. Beyond this you must have a sound system of revenue collection so that wealth can be redistributed and the gap between rich and poor narrowed.

The discovery of huge gas and oil deposits has become a curse for a number of African countries. A gas bonanza is coming to Tanzania. How can Tanzania make its rich gas finds a blessing rather than a curse?

This is a question confronting a great many countries that have discovered oil and gas -- and other natural resources as well. The key is to ensure that the regulatory structure -- including government oversight -- is sufficiently developed to promote the efficient, transparent and equitable awarding of extraction right.

Equally important are transparent and equitable means of collecting royalties. Transfer of technology to local interests is vitally important but this will require a foundation of know-how among local engineers and workers.

To develop this sort of institutional infrastructure will take time but it is an investment that will go a long way towards insuring that gains from this wealth are invested wisely in the people of Tanzania.

Five decades after independence, Africa has failed to industrialize.  As a competent observer, what are the underlying factors for this failure?

But this is changing. In my view, Africa is poised to become a second China provided African markets integrate with each other. Rising foreign direct investment, closer regional integration -- particularly in Eastern Africa -- strong growth and an improved regulatory and legal environment have brought stability and a much better climate for manufacturing.

The East African Community's progressive regional integration programme has led to around 50% rise in intra-regional trade. This is very important because if you do not trade with your neighbours, if you do not have the economies of scale that come with access to larger markets, then entrepreneurial activity is stymied.

A trade facilitation deal by WTO members before or at the Bali Ministerial Conference would further buttress these efforts at regional integration by sweeping away red tape which hampers the transit of goods and raises the cost of doing business.

Africa's growth will exceed 5% annually over the next three years -- ahead of the global average. All these factors have boosted confidence in Africa, on the continent and abroad.

This is a very important first step. Another important transformation that is underway is the spread of global value chains and Africa's participation in them. It's true that Africa has not participated as much in these chains as others, but this too is changing.

African productivity is on the rise. If you measure productivity in terms of GDP per capita you will see that Tanzania's productivity has risen by more than 5% per year since 2011 and is projected to grow at this rate through 2015. This is good, but is still behind that of China and Vietnam.

This said with sound policies, good governance and sufficient investment -- and Aid for Trade programmes can of real benefit here -- East African countries like Tanzania can become competitive in light manufacturing sectors like furniture, footwear, textiles and clothing.

This is a question that many people are asking. It is rumoured that after your retirement as WTO head, you are going to devote your energies to seeking the highest political office in your home country, France.  Can you shed light on this matter?

DG:  I will only decide what to do after I have left my service at the WTO. For now, I am devoting all my energies to ensuring that I hand over to my successor an organization that is running as effectively as possible.