The International Conference on Financing for Development, held in Monterrey, Mexico, last week, provided yet another chance for world leaders to discuss what's needed to improve the lives of the poor in Third World countries. Their resulting "Monterrey Consensus," however, was long on promises and short on concrete actions.
One of the issues highlighted at Monterrey is market access for developing countries. In this area, Canada lags behind other industrialized countries. The G8 summit in June provides an opportunity for Prime Minister Jean Chrétien to change that and seriously help efforts to alleviate poverty in poor countries. The next chance Canada gets will be at the conclusion of the WTO round of trade negotiations -- which will likely end in 2010.
That Canada has a long way to go on market access is not disputed in international circles. Canada applies higher duties on more products exported by Least Developed Countries (LDCs) than most industrialized countries. A recent World Bank study shows that, compared with those tariffs imposed by countries in Europe or Japan, Canada imposes high tariffs on roughly 10 times as many products exported by LDCs. Our own research here at the Asia Pacific Foundation Canada shows that Canada imposes tariffs on 60 per cent of imports from Least Developed Countries. Even our recently protectionist Southern neighbour does better than Canada on these counts.
And Canada has done very little to change this protectionist reputation. In 2000, our then-minister of trade, Pierre Pettigrew, announced a market-access package for LDCs that gave duty-free, quota-free treatment to 570 tariff lines or products. This was done, ostensibly, to improve confidence in the WTO and help launch a new round of multilateral trade negotiations.
The devil is in the details: Our research shows that in 1999, Least Developed Countries actually exported products from only 67 of these tariff lines. The total value of these products was a mere $543,000 -- that is, less than 0.2 per cent of LDC exports to Canada in that year. The hit on the Canadian taxpayer of this largesse, as a result of foregone revenue, is a miniscule $25,000.
When it comes to trade policy, the devil is truly in the details. The path of least resistance that is likely to be taken by Canada at Kananaskis will target a group of 34 Least Developed Countries in Africa. The Africa package will likely reduce or eliminate high tariffs and quotas on textiles, apparel and footwear products -- but will exclude even higher tariffs and stricter quotas in supply-managed agriculture, such as eggs, dairy and wheat.
An Africa-only LDC package is simply not wide-ranging enough -- that is, if Canada actually wants to do something about global poverty. Are we right to be skeptical on this point? Consider this. In 2000, Asian Least Developed Countries accounted for 66 per cent of LDC imports into Canada, and about 96 per cent of revenue generated from prohibitive tariffs.
Almost all of the textile, clothing, and footwear imports from LDCs come from countries such as Bangladesh, Myanmar (formerly called Burma), Cambodia, Laos, Nepal, and Maldives. And these Asian LDCs could be excluded in an Africa-only package. Quotas on apparel products were also applied disproportionately on imports from Asian LDCs. In fact, the only African LDC that could feel a positive impact as a result of quota elimination under a proposed Africa package would be Lesotho -- and only for one product category, trousers.
Domestic industries will no doubt argue against any further opening, either real or potential, of markets. We can expect our supply-managed agriculture sectors to warn that a market opening to the poorest countries of the world will be just the "thin edge of the wedge," and that such openings could unravel poultry, egg and dairy production in Canada. Never mind that LDCs lack the technical capacity and infrastructure to support production and quality control, and implement Canadian health standards. Or that, in 2000, they exported only $30-million in agrifood products (and virtually no supply-managed products) to Canada.
For its part, the apparel industry is going to fight opening markets by highlighting the potential loss of thousands of Canadian jobs -- even though between 1992 and 2000, employment in the apparel sector in Canada increased by more than 20 per cent to 93,000 workers, at a time when imports of apparel increased by 85 per cent. Or that Least Developed Countries together exported $241-million in clothing to Canada, representing only 3.4 per cent of shipments of the domestic industry.
The intricacies of Canada's free-trade agreement with the United States are such that they allow us to collect five times more duties from LDCs' clothing exports -- from countries like Bangladesh, Cambodia, and Nepal -- than we did from the United States. And the United States exported three times more clothing to Canada.
What is interesting is the overall trade figures from Least Developed Countries as a share of imports. In 2000, these countries represented a mere one-tenth of 1 per cent of total Canadian imports. How much of a threat could they be?
The time is ripe for Canada to credibly demonstrate its credentials as a trading nation by moving to open market access for all Least Developed Countries in all products. Efforts to alleviate poverty in some of the poorest countries of the world require a comprehensive approach to development; opening markets is essential to these efforts. Indeed, research by the World Bank, among others, suggests that opening markets would do more to help poor countries than development assistance can ever hope to do.
The Prime Minister acknowledged as much in his statement at Monterrey, when he said that increased development assistance "will never by itself create the sustained economic growth that is integral to achieving meaningful development and a better quality of life." Duty-free and quota-free treatment for products from LDCs creates the incentives to achieve sustained and meaningful development. Will Mr. Chrétien deliver the goods at Kananaskis?
John D. Wiebe is president and CEO of the Asia Pacific Foundation of Canada in Vancouver.
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