The G8, trade and development

Next week’s G8 summit in Northern Ireland will probably be dominated by discussions over a transpacific trade agreement and a proposed US-Europe deal. Both aim at boosting flagging growth in the world’s biggest economies. That would be good news for the whole world.

But don’t forget about the impact of trade deals on developing countries, argues Yurendra Basnett in a preview of the summit. Without careful design these two mega-treaties risk doing little for the developing world and could even make matters worse.

Trade taxes are already low, so the focus is likely to be on standards and trade facilitation. If the G8 agrees anything in these areas, Basnett argues, it should sign up to a principle of ‘do no harm’.

Take car production lines: common standards on both sides of the Atlantic would mean manufacturers no longer have to operate two separate production lines. A good idea in theory, but what about other countries? If EU–US trade standards damage Japan’s car industry, supplier countries like the Philippines and Samoa will suffer.

The UK has made a welcome proposal to help African countries reduce border crossing times and increase intra-regional trade. No-one can argue against making borders more efficient, but potentially unforeseen consequences may emerge: workers who earn their livelihood from delays at the borders must be ensured employment elsewhere.

Smoother borders will only lead to more trade when countries have the capacity to produce more and governments can effectively manage any improvements. It’s no use breaking down trade barriers if economies haven’t got anything to sell.

Efficient borders will provide value for money when they are facilitating more trade; efficient borders with no trade will be merely white elephants.

Basnett further argues that developing countries should have a role to play in new production networks and that countries should be helped to export better quality products.

A ‘do no harm’ principle aimed specifically at developing countries would be a major step forward.

G8 get-togethers are normally just talk-fests resulting in little more than a watered-down press release. Any progress on the two other ‘Ts’ to be discussed at the conference — tax and transparency — would do more for the developing world.

But with the World Trade Organisation Ministerial conference approaching in Bali next December, the group could at least show a statement of intent about trade that would be difficult for the WTO to ignore.