Speech at the University of Addis Ababa<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /> WTO Director-General Pascal Lamy 11 May 2012 Excellencies, Ladies and Gentlemen, I am very pleased to be here with you today at this prestigious University of Addis Ababa. What better venue to discuss competitiveness in Africa — the topic of my lecture today — than a university, a place full of competitive and creative spirit of thousands of students. The presentation of the WEF’s African Competitiveness Report a few days ago here in Addis is an ideal platform to reflect further on the linkages between trade, growth and competitiveness, and to discuss how countries can take advantage of the Multilateral Trading System, and especially the WTO accession process, to enhance competitiveness. Hence, my remarks today will cover: first, the benefits of WTO membership in economic policy making; second, the perspectives on competitiveness in Africa; and, finally, WTO accession as a tool to enhance competitiveness through domestic reforms. WTO Membership The role that trade can play as an engine for growth and development has long been recognized. By creating a competitive business environment, trade opening fosters the efficient allocation of economic resources, enhances output and productivity, and, increases overall welfare gains. The lessons of history are clear: when severe impediments to trade — both international and domestic — exist, economic growth is hampered. Thus, it is the more open, export-oriented economies that have generally succeeded in their development efforts, although this is not a formula. Trade policy is not a stand-alone policy and requires complementary policies. Governments pursue WTO membership for a variety of reasons: First, at a “macro” level, WTO membership lends added credibility to government policies and sends clear signals to investors about a country’s commitment to an open economy. The implementation of WTO rules is, in this sense, synonymous with the acceptance of a set of internationally-recognized best practices. In turn, this encourages the inflow of foreign investment and technological know-how. Second, at the “micro” level, domestic businesses stand to benefit a great deal from the establishment of a transparent and predictable trade environment, which results from the conclusion of every WTO accession process. In fact, at its core, the framework of WTO rules is aimed at improving the business environment for foreign and domestic private sector operators. For instance, for Ethiopia and many other African countries, the principal benefits of WTO membership stem, inter alia, from the adoption and application of WTO trade rules. Furthermore, also in the case of Ethiopia, export-oriented operators are likely to benefit directly from guaranteed and enhanced access to the markets of all WTO Members on an MFN basis, without the uncertainty of preferences. Thus, in many ways, the process of WTO accession can be seen as a gradual process of investing in a country’s future legal security and competitiveness. Competitiveness in Africa Africa has weathered the recent global economic crisis better than other parts of the world. Between 2001 and 2010, GDP growth in Africa averaged 5.2 per cent. The key driver of the recent growth in Africa was the increase in commodity prices, which does not necessarily translate into higher productivity. To sustain growth, African countries need to make improvements in competitiveness and productivity, and to take better advantage of international trade through deeper integration regionally and globally. Presently, amongst Africa’s challenges in trade are: (i) small national markets; (ii) landlocked countries with poor infrastructure; and (iii) historical export composition and trade patterns. Even though growth rates of African countries accelerated in the last decade, their export growth, mostly driven by natural resources, lags behind that of other developing regions. Intra-African trade currently stands at 12.3 per cent of the region’s exports, up from 9.4 per cent in the year 2000, but this figure remains low by international standards The picture remains mixed and there is clearly scope for expanded, more competitive regional integration. Better regional supply and logistics facilitate trade expansion, export diversification and the ability to attract FDI which contribute to competitiveness through advancing managerial skills and technological capacities. Global integration further connects a country to international markets and extends demand beyond national borders and beyond the region. The globalized economy, in turn, offers firms access to new technologies, skills and financial resources. Africa’s competitiveness is advancing through the introduction of more sustainable fiscal policies, debt reduction and low debt levels. Governments are divesting from private sector activity and opening up some previously public dominated sectors. Telecommunications is an example. There are improvements in labour market efficiency. As a specific example, Rwanda’s recent successes can be attributed to such strengths as well-functioning institutions, state-of-the-art IT, low levels of corruption, an improved security environment, efficient labour markets and relatively developed financial markets. Despite these recent positive trends, there should be no room for complacency and there is scope for improvements. The broader economic structure and environment within which firms operate requires improvement, so as to maximize the advantages of low labour costs and availability of natural resources. Trade logistics, infrastructure and the business environment also require rapid and constant improvements. Law and policy with regard to land ownership and intellectual property rights protection require urgent improvements. These will assist better absorption of technology and modern managerial skills. Exports are hindered by bureaucratic red tape, customs and port delays and high inland transit costs. These obstacles need to be tackled to place African economies on the path of enhanced competitiveness and sustainable growth. The WTO accession process helps put in place a sound legal, policy and administrative framework for trade and a predictable business environment to attract FDI. Hence, the domestic reforms necessary in WTO accession can provide a foundation and a tool to enhance a country’s competitiveness. |
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