Minister Lehtomäki: The role of trade as a catalyst for economic growth in Africa
Introduction by the Chairperson of Panel 1, Minister for Foreign Trade and Development of Finland, Ms Paula Lehtomäki, at the Nordic Africa Initiative Ministerial Conference
Dar es Salaam, Tanzania
20 January, 2005
Let me wish you all welcome to the first of the three panel sessions of this Nordic Africa Initiative Conference.
I wish to make good use of the short time available for this session and go right into business. After my brief opening remarks and those that my co-chairman might want to make, we will hear the remarks of Dr. Supachai Panitchpakdi, Director General of the WTO, whom I would like to warmly welcome among us. Then I will invite the members of the panel to make their contributions. I hope that the debate will be lively. I will then make some closing remarks and bring the session to an end. I hope that this simple game plan is agreeable for all of you. Thank you.
International trade can offer opportunities for firms in countries facing problems of widespread poverty and weak purchasing power at home. Exports can thus offer a platform for growth and employment generation. Export income is also essential for financing imports of factors of production, technological products that are not produced at home, but are necessary for enhancing productivity.
To be able to export, you need something to sell profitably. Many LDCs' economies rely heavily on the production of primary commodities. In many cases the prices for these commodities are deteriorating vis-à-vis prices of manufactured goods that need to imported from industrialized countries. Consequently, many LDCs are suffering from chronic trade and current account deficits, which in turn means problems of indebtedness and/or deep aid dependency.
A sometimes forgotten factor is internal, domestic trade. The role of local markets andtheir development can be the key to poverty reduction. The most vulnerable groups of people are often not connected to international activities or they are the very last link in a long chain of producers and intermediaries. These informal sector traders and subsistence farmers are far away from the dynamics of international trade. In fact, most people in the LDCs are not directly linked to the international economy.
Supply-side constraints range from unreliable provision of electricity and water, to poor roads and railways; through weak institutional and policy frameworks to low labour productivity arising from poor education and health provisions. We should remember that capital accumulation and technological progress are the engine for growth. The role of international trade is to fuel this engine.
Even if you have something to sell profitably on the international market, you need access to markets. LDCs already enjoy considerable preferences in the developed markets, in fact so such so that for instance in the EU nothing much more can be done in terms of product coverage. Other improvements, such as rules of origin, can be made, and assistance can be given to meet quality standards and to master the procedures involved at the various stages of export operations.
However, one should not only look at markets in the EU or in other industrialized countries. Neighbouring countries, markets close-by, can also offer important economic opportunities. Regional economic integration can therefore be an important factor in boosting economic growth. Competitive regional firms can grow gradually to be important global players in their sectors. Regional trade can therefore offer a platform for internationalisation of firms.
Trade and growth do not automatically lead to poverty reduction. If export activities remain as isolated enclaves from the rest of the economy, then hopes for employment generation and poverty reduction are seriously undermined. Appropriate national policies are needed to ensure the enabling environment for a well functioning private sector, equitable income distribution and fight against corruption.
Our job as policy makers is to ensure that the multilateral trading system is conducive to economic and social development. An important contribution to the debate on how to reform the WTO, has just been issued by Mr Peter Sutherland and the group he chairs.
It is clear that the existing multilateral system can and needs to be further developed so that it can function efficiently in changing global economic environment. The acceleration of economic liberalisation of the past decade has meant that common multilateral rules reflecting the structures of our economies as well as trade and investment, are more needed than ever before.
Right now, the negotiations of the Doha Development Agenda are a top priority. This is why we would like to encourage African countries to participate fully in the Doha round, building on the consensus that was achieved last July in Geneva. I am sure that Dr Supachai will inspire the debate on this topic.
With these introductory remarks I will invite the co-chair, Minister Patel of Zambia to comment and after him Dr. Supachai to take the floor.