Jaya Krishna Cuttaree, the Foreign and Trade Minister of Mauritius, is one of the four candidates for Director-General of the World Trade Organization (WTO).
Here is a favorable profile from the Inter Press Service of Johannesburg, March 10, by Stefania Bianchi, "Trade: Poor Countries' Man Makes a Strong Case", and here is his biography from the WTO web site: "Jaya Krishna Cuttaree".
Mauritius is a small island country in the Indian Ocean. A well governed democracy, it's had a remarkably good growth record. For some background, look at this article by Arvind Subramanian from the IMF magazine, Finance & Development: "Mauritius: A Case Study".
Cuttaree's candidacy has been endorsed by the African-Caribbean-Pacific (ACP) grouping of countries. This is a group of smaller developing countries with historical colonial ties to Europe; they benefit from European tariff preferences (tariff breaks).
In this post I've culled selections from a few of Cuttaree's speeches, to get a better idea of some of the things he stands for. The starting point for this post is a speech he gave to the Mauritius Chamber of Commerce and Industry this past March.
In this speech, he points to the importance of trade to developing countries, points to the problems many of these countries may have in taking advantage of trading opportunities that may open up to them, and argues for the importance of various measures to help them out. I've used other speeches to flesh out some of his points, and to shed light on his negotiating philosophy.
Trade is important to developing countries
In the Chamber speech, he explained the importance of trade to developing country growth.
He argues that trade isn't an end in itself, but promotes the underlying objective of better living conditions. From the point of view of the developing world, trade is one of several factors, which also include aid and debt-relief, for achieving sustainable development.
However, trade is the most important of these factors: "Trade can be a catalyst in developing a country's productive capacity and growth and lift millions out of poverty and the shackles of marginalisation."
So trade is extremely important to developing countries. The development of a rules-based trading system through the WTO may be more important to smaller developing countries, than to developed countries, or larger developing countries,
"�an effective and equitable multilateral trading system is in the general interest of every Member. But it is even more vital for us, weak and vulnerable developing countries which have very little economic clout in the world economy. The major players have the option of negotiating bilateral FTA�s and choose those with whom they want to deepen integration. We do not have such options. Only a rule-based trading system will offer the best protection to the rights of small players� (quoting himself from an earlier speech)
Developing countries may need special help to take advantage of trade opportunities
In the same speech, he pointed out that more liberal trading rules will only help countries that have something to trade. Many developing countries, especially small ones, need help here. They can't "produce competitively"; they face "supply side constraints."
On January 26, after addressing the WTO General Council, he participated in a question and answer session sponsored by a group of NGOs. One of his answers, summarized by session organizers ("Minutes of Civil Society Hearing for WTO Director-General Candidates"), gives a better sense of the "supply constraint" issue. It also indicates that some developing countries have more difficulty with supply contraints than others:
"However one also has to be extremely careful about proposing liberalization of agriculture trade. Because when people talk of developing countries producing more agriculture products if trade liberalized we make a fundamental mistake because developing countries are not a homogenous group. You take a country like Brazil and Mali, both developing countries, however capacity to produce to take account of increased market access are completely different. Africa lives off agriculture. Mostly peasant farmers, and those proponents of liberalized agricultural trade use Africa as an example of a continent which can benefit from increased market access. He says there is a big flaw in that statement because of the capacity to produce competitively in Africa. No roads, ports, refrigeration, SPS problems. Unless these supply side constraints are actually addressed the liberalization of markets in agricultural products is going to benefit a certain number of countries and certainly not the majority of people who we think are going to benefit from that liberalisation...He can see very easily in the case of poultry some large developing countries killing the poultry industry in many parts of Africa."
While small developing countries may need help with supply constraints, he says in his Chamber speech that, "...it is not WTO's role to address supply side constraints." The WTO does have a "duty to raise awareness of the problem..." and it is "imperative" to encourage meetings between the heads of WTO, the World Bank (WB), and the IMF, to encourage "collaboration" and program coherence. In the NGO session described above, he went on to discuss the role of the WTO, and that of other multilateral organizations, in addressing these supply constraints. From the minutes:
"This is why he says that if you are looking at the liberalization of agriculture trade you must have a coherence between market access and capacity to produce, to have coherence between the WTO and institutions like the WB and development partners like the EU to ensure that the resources are there to build the capacity of these countries in Africa to be able to take account of this access..."
Special and differential treatment for developing countries
In the Chamber speech, he notes that countries differ, and the WTO should address the distinctive needs of developing countries. These countries need special and differential (S&D) treatment within multilateral WTO trade treaties.
S&D means more than "a system where developing countries were simply given more time to adapt to negotiated trade rules through temporary exceptions and exemptions." "Temporary exceptions and exemptions" could be things like slower implementation of tariff reductions.
Affirmative and longer term action is necessary. Measures are needed, "to establish rules that can foster development and to come up with measures that will enable developing countries to implement these rules and to reap the benefits of further trade liberalisation."
Examples of of these additional measures may be inferred from these Cuttaree remarks, from 2002, ("Rules Issues and Special and Differential Treatment"):
"There are several instances where the WTO Agreements impose onerous obligations upon developing countries and restrict them from taking initiatives and measures to achieve industrial development (e.g. Subsidies, TRIMs and TRIPS).
The Agreement on Subsidies curtails the right of developing countries to extend assistance and support for industrialization. It eliminates the acceptability of subsidies as a tool for economic development programmes, which however has been agreed to during the Tokyo Round.
The Agreement on trade-Related Investment Measures (TRIMs) imposes an obligation on developing countries to eliminate the type of investment promotion policies that developing countries could use to promote domestic industry (i.e. obligation on foreign investors to indigenize part of domestic production)..."
Small developing countries need tariff preferences
Many of the least developed countries depend on exemptions or partial exemptions from normal developed country tariffs (tariff preferences) to give them a competitive boost. Negotiations that reduce normal developed country tariffs, erode the effective size of these preferences, and the competitive advantages they provide ("preference erosion").
An IMF publication titled, "Who Can Explain the Mauritian Miracle: Meade, Romer, Sachs, or Rodrik?" suggests that there is disagreement on the sources of Mauritian growth. However, this Cuttaree speech from the WTO Minister's meeting at Cancun in 2003, leaves no doubt that he attributes a lot of this growth to trade preferences granted to Mauritius: "Statement Circulated by the Honourable Jaya Krishna Cuttaree Minister of Industry and International Trade":
"The positive economic development of Mauritius during the past three decades has been mainly due to a combination of factors, including a stable and democratic political system, good governance but above all due to the preferential market access that we have been enjoying on the EU and the United States markets both for agricultural and non-agricultural products. This access is absolutely essential to countries like mine which do not have the capacity to compete with larger, more resource-based countries.
This preferential access has been instrumental in ensuring the economic development of Mauritius...
From the Mauritian experience, it can be safely assumed that through the extension of preferential access, even the most vulnerable of countries can pursue a successful development and export oriented policy..."
Helpful as preferences are, in March he told the Mauritian Chamber of Commerce,
"We have consistently explained that preferences cannot permanently be part of a trading system which will ultimately lead to free flow of goods and services across national borders. However, given the disparity among levels of development of WTO members and the importance of preferences to weak and vulnerable economies, preference erosion needs to be carefully sequenced so that it does not signal the end of these economies..."
If one point of the trade negotiations is to lower tariff levels, and if the preferences derive their value from the height of the tariffs, there is a problem. A 2003 Mauritian paper on preferences, submitted to the WTO, (TN/MA/W/21), suggests some ways out:
"4. When examining the problem of preference erosion, it is essential to keep in view that, from the perspective of the exporting country, preference erosion would be particularly serious where exports are concentrated in a limited number of products on very few export markets. As a matter of fact, this is the most important feature characterising exports under preferences. While preference schemes, in principle, could cover most, if not all the chapters and tariff lines..., in practice, however, exports are limited to very few products and a limited number of tariff lines.
5. Consequently, addressing preference erosion would effectively mean maintaining tariffs over a certain level for a very narrow range of products, especially since the export basket of the preference beneficiary countries is almost the same...
6. ... products which are of specific interest to the preference beneficiary countries, in particular textiles and clothing, leather products, footwear and fish and fish products. ..only a limited number of specific tariff lines within these broad product categories are of direct concern to these countries. It is proposed that these tariff lines be identified by the countries concerned and a list compiled by the WTO Secretariat. It is further proposed that such tariff lines be either excluded from tariff reduction or that a maximum tariff reduction of 10% on each tariff line so identified be staggered over 10 annual instalments on developed country markets...
8. Necessary technical assistance should urgently be provided, particularly in regard to the identification of the tariff lines referred to...
9. We are further reiterating our proposal for the setting up of a competitiveness fund in the context of global coherence policy making by international financial institutions in order to assist the industrial restructuring and adjustment of countries most affected by the reductions/phasing out of tariffs."
One advantage of this approach is that, "the momentum of tariff liberalisation would not be disturbed since only a very narrow range of products would be excluded from the process..."
Approach to negotiations
I thought these remarks to the ACP country trade ministers, shortly before the July 2004 Geneva meetings suggested an attractive combination of principle, pragmatism, and respect for other parties to the negotiations. They're not connected to the Chamber speech, but I'll pass them along: "Speech at the Opening Ceremony of the 8th Africa-Carribbean-Pacific Trade Ministers� Meeting, 11 July 2004":
"A negotiation has two dimensions � it involves a process and it has a substance...As regards our negotiating substance, I shall refrain from making any elaborate comment at this stage...
...I would like to make a few comments on the process, a consideration that is often neglected although the process may have a significant bearing on the substance. First, at our own level, it is important that we understand that a negotiation is a dynamic process and in a multilateral setting, it will demand constant adjustment and trade-offs. It is therefore important that we transcend our declaratory postures to move into a negotiating mode. It is important that we learn from the lessons of Cancun so as not to be pinned down in the blame game once again. We have the numbers but this is not enough. We must know how we utilise our strength and how we might bargain and persuade and avoid being only negative. We must also learn to seek and broaden our alliances at the WTO so as not to remain isolated.
It is therefore important that we infuse in our stance the right measure of tactical flexibility that will avoid us becoming prisoners of our strategy thus preventing us from participating meaningfully in the negotiations. Of course we must define the red lines below which we are not prepared to cross. But at the same time we must be aware that our partners have their compulsions as well. It is therefore important that we adopt a problem-solving approach as a negotiation cannot be a one track affair nor can there be a winner-takes-all outcome.
Another important aspect is how we focalise on our core issues and prioritise our concerns. In this regard we must put to profit our meeting here to-day. We know what our concerns are and as I said earlier, we have spelt them out in several declarations. As we move towards the writing of the Framework Agreement, it is important that we prioritise those issues, prepare fallback positions and trade-offs and most importantly request our trade experts to develop the sort of language that we would like to see on our concerns in the framework text. It is important that in so doing, we do not open the pandora�s box. Whatever be our convictions, the point of departure of these negotiations remains the Doha mandate to which we have all subscribed. It is important for us to be credible and not to seek to unravel a document which is a delicate compromise and to which we were a party. Success for us will depend on the perception that we are not a Group that just has the numbers to block consensus but, on the contrary, that we have in us the capacity for constructive engagement to put forward ideas and solutions.
As we engage in our deliberations at the level of the ACP, we must be conscious how our meeting dovetails with other processes in which we will be involved. In two days time, we shall move into the larger G-90 Group and from there on we must interface with the larger process on-going in Geneva. In both these instances, we shall have to integrate the concerns of other negotiating groups which may have the same defensive interests as ours but also certain offensive interests which may not be quite ours. We must be able to reconcile those contradictions in a creative manner so that we ensure a balanced outcome with no losers.
In the final analysis, however, I would also like to make one thing clear. In as much as we would like to be constructive and show the required flexibility, we cannot be flexible or be constructive in a process if it is not transparent. We can only do so if the bigger process at the WTO is an inclusive one and we are allowed to participate."
