MONTERREY, MEXICO -- The Canadian government is planning to announce major concessions on trade barriers for the world's poorest countries in time for the Group of Eight summit in Alberta in June, federal sources say.
Poor countries have been agitating for the market-access package for years.
An end to tariffs and quotas on some agricultural products will be at the centre of the package, but it could also include the elimination of protections for clothing and textiles as well as some other products, the sources say. The dairy industry and direct subsidies to Canadian farmers, however, are not on the target list.
Prime Minister Jean Chrétien has already directed government officials, led by Industry Canada, to figure out which products are best suited for the package, both from a Canadian industry point of view and from a developing world point of view.
The consultations will be highlighted during Mr. Chrétien's trip to six countries in Africa in early April, the sources say, but a final decision on which products to include won't be ready until June. The package will also integrate proposals to help Canadian industries better deal with cheaper imports from the developing world once the trade protections are lifted.
Canada has long resisted dropping its tariffs and quotas to protect its textile sector, and has insisted on maintaining protections and subsidies for farmers to produce grain, livestock and dairy products. Canada also deters imports of some food products through tariffs and quotas.
That's despite growing pressure from the least developed countries on the rich to open up their markets, especially in the agriculture and textile areas, to help the poor develop world-class industries.
The developing countries argue that by keeping them out, the rich are only exacerbating their poverty. Textiles and agriculture are two of the primary exports for many developing countries.
Better market access was a key demand at the United Nations Financing for Development summit last week in Monterrey, Mexico. But although rich countries were lining up to show how much more new foreign aid they were willing to give, no one made a single commitment on cutting subsidies or eliminating tariffs and quotas.
"We must call on the [industrialized] countries to act on the more than $360-billion [U.S.] of agricultural subsidies, which lock out imports from developing countries," South African President Thabo Mbeki told the summit.
The pressure is particularly intense for Canada, because it prides itself on being a free trader, and because Mr. Chrétien wants to make eradication of poverty in Africa his main theme at the G8 summit in Alberta this summer.
But on a domestic level, for Canada as well as the United States and Europe, opening up such markets is extremely sensitive. In Canada, farmers have struggled to get by on relatively low government subsidies as they compete in the world market against heavily subsidized U.S. and European goods. Any mention of cutting subsidies to farmers would enrage a large constituency in the West, and tampering with the dairy system would cause trouble in Ontario and Quebec.
As for textiles, the industry in Canada is based in Montreal, and it is often thought to be vulnerable to a flood of cheap imports from developing countries if Canada opens up its market. The textile industry is mainly centred in the ridings of Trade Minister Pierre Pettigrew and Finance Minister Paul Martin -- the two ministers in charge of tariffs, quotas and trade policy.
But the plea from developing countries has been ignored for so long -- and grown so loud -- that to overlook it any longer would be embarrassing to Mr. Chrétien. He hinted in Monterrey that he would be more than willing to drop subsidies to agriculture, if Europe and the United States would, too. And he's acknowledged that the arguments of the developing world on market access are valid.
A recent study estimated that removing all trade barriers could bring a potential gain to developing countries of about $130-billion a year -- almost triple what the UN estimates is needed to eradicate extreme poverty, put every child through primary school, bring more equality to women, and start a serious fight against AIDS and other infectious diseases.
"Trade is the most important avenue for self-help. It generates income and reduces aid dependency in poor countries and creates a win-win situation for all," Horst Kohler, managing director of the International Monetary Fund, told the Monterrey summit. "We must work ambitiously to open markets and phase out trade-distorting subsidies in the industrial countries, and to reduce barriers to trade among developing countries."
But most rich-country leaders, when confronted with these facts, point to last fall's agreement in Doha, Qatar, to launch a new round of development-oriented trade negotiations under the World Trade Organization. However, that agreement is not due to be concluded until Jan. 1, 2005, and few experts expect the European Union and the United States to give much ground on agricultural subsidies. Plus, few trade rounds meet their deadlines.
But the president of the World Bank, Jim Wolfensohn, says there is no need to hold back until the end of the round.
"It is the task of leaders to remind electorates that lowering of trade barriers will not cost the rich countries anything in the aggregate; they gain from freer trade in these areas," he told the summit. "There is little sacrifice required, no excuse for failing to take action that would leave all countries better off."
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