Equipping ITC for the priorities and challenges of today (en)

Speech by Mr. Pascal Lamy, WTO Director-General.
Delivered on Day One of the 46th Session of the ITC JAG, 21-22 May 2012.
Monday, 21 May 2012, 10:20-10:30.

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Secretary-General Supachai,
Executive Director, Patricia Francis,
Ambassador Badr,
Ladies and Gentlemen.
 
Thank you for inviting me to address the JAG.

I have often remarked that the WTO and UNCTAD are your parents.  With ITC’s growing maturity as an organisation that delivers for developing countries I may have to slightly reformulate that argumentaire and cast the WTO and UNCTAD as your older siblings! Irrespective of the family lineage, the ITC is one of the WTO's key partners in trade capacity building. And we all know that is precisely trade capacity building, more than flexibilities or preferences, the main lever to make trade work for development.

We therefore have a stake in ensuring that ITC succeeds as an organization both in terms of its internal operations and in the delivery of its services and products.

Let me focus on four priority areas where I believe ITC can play a key role in the next years. 

I will start with trade facilitation. There is general agreement that a multilateral deal simplifying customs and border measures is a win-win deal. It would improve the cost and efficiency of doing business. And this is why many countries – developed and developing alike - are already taking measures in that direction. Because it increases customs productivity, it improves trade tax collection and helps attract FDI.  According to one recent study, implementation of the WTO Trade Facilitation Agreement would halve the total trade costs which today amount to 10 per cent of world trade, and which is a bigger handicap for small countries and small traders.

ITC has a valuable role to play here by helping SMEs to better understand and address the trade facilitation related barriers they may face in exporting and in importing, which is essential to help these smaller players integrate in regional and global production chains. ITC’s work in the area of market knowledge, through its surveys for example, is an important element in ensuring that the actual barriers faced by companies are made known to policy makers. And these barriers are not just trade facilitation. Or indeed not necessarily related to tariff barriers. Non-tariff barriers are now amongst one of the most commonly identified barriers to trade.  And this is why the WTO's 2012 World Trade Report will be devoted to Non-Tariff Measures.

The second area is Aid for Trade and global and regional value chains.

Global value chains are not a new concept. What is catching the attention and the imagination of developing countries is how they can use supply chains to move up the value addition chain and create economic growth and jobs.

The potential in Africa is immense. The same holds true for the small economies of Central America, the Pacific and the Caribbean where properly functioning regional supply chains could be one important solution to addressing the problem of economies of scale.

ITC's comparative advantage of its vast network of producers, suppliers, and entrepreneurs can be used to gather more and better information about the constraints faced by SMEs and the priority action needed for their better insertion into supply chains.

And it is Aid for Trade that can help businesses in developing countries unlock the economic potential of value chains through diversification AND specialisation in sectors where they can have some form of comparative advantage or niche potential. It is here that ITC can best assist even if Governments will have their part to play too. For regional or global value chains to prosper, and indeed for investors to come, gaps in infrastructure, logistics and the business environment must be addressed.

The 2013 Fourth Global Review of Aid for Trade will have global value chains and the private sector as its focus. This fits with the work that the ITC is doing and I suggest that you continue to work closely with the WTO to maximise your contribution to the preparatory process for the Review.

The third are pertains to LDC issues. At the 8th WTO Ministerial Conference a number of decisions were adopted to further assist Least-developed countries (LDCs) to better integrate into the multilateral trading system. There are three areas in particular where ITC's work must continue to be a priority.  The first one is accessions. During my recent trips to Ethiopia, I saw first hand the work that ITC was undertaking with the Chamber of Commerce and the Commodity Exchange, to help build up the institutional capacity of these organisations to better take advantage of the opportunities which accession to the WTO would offer. I also saw the impressive results already achieved in flower farming. Similar work is being undertaken in a number of LDC countries in the accession process and those considering accession. These programmes should be intensified.

ITC can also assist LDCs in taking advantage of the flexibilities provided under the Services Waiver. You have a wealth of information and research on the priority services sectors of a number of LDCs- those that are established and those that have the potential to become competitive either regionally or globally.  This is an area where you can make a concrete difference.

The EIF is continuing to successfully evolve into a platform for LDCs to craft their needs and priorities and identify the projects and interventions that would best meet these priorities. ITC’s involvement in the operationalization of tier 2 projects must be a priority for the next two years.

My final point relates to regional integration. The potential for regional integration in Africa, South-East Asia, the Middle East, the Caribbean, the Pacific or Central America has not fully delivered on its promise of driving diversification.  There are a myriad of reasons for this. From lack of regional infrastructure, whether hard or soft, to lack of sustained political will.

In Africa much of cross-border trade remains primarily informal, mostly because of the high costs of trading across borders.  In some African countries, informal regional trade flows represent up to 90 per cent of official flows. Whereas it costs around US$900 to ship a container from South-East Asia, it costs almost US$2000 to ship the same container from Africa. Barriers, both tariff and non-tariff in nature, continue to dominate the regional trading picture in Africa. Sub-Saharan African countries impose more non-tariff barriers on trade between themselves than on trade with third countries.

One clear impact of the lack of integration of these economies is the limited participation of firms from these countries in global value chains. High fragmentation of markets, high transaction costs and complex regulatory systems are not conducive to such integration.

There are growing signs however that political support for a more focused approach to regional integration is increasing.

The Caribbean’s work on a regional Aid for Trade strategy and the identification of regional priorities and projects is a sign that the small economies in that region are recognising the importance of regional cohesion.

In Africa, the recent African Union's decision on boosting intra-African trade has set off a series of work focused on operationalizing this decision. ITC has a critical role here. Not in identifying why regional integration is necessary - there is a common understanding of this; nor in creating new structures or mechanisms to implement the decision. Rather, ITC, along with other development partners such as the WTO, the World Bank, the African Development Bank and the UN Economic Commission for Africa can help to support African countries in better using the existing frameworks of the Regional Economic Communities (RECs) to improve and monitor the implementation of the decision taken by their leaders. This will include identifying the barriers to closer regional integration but also assessing the policy options to overcome these barriers.

Support for closer integration of markets helps prepare SMEs for producing and trading abroad. It is a training ground for meeting standards, using distribution systems and manoeuvring through regulatory and legal obligations. Your work with the RECs in this area must be made a priority.

Before I conclude, let me turn briefly to two issues that I consider crosscutting in nature. 

The ITC continues to do exemplary work on women and international trade, which must be seen as an issue within all facets of the ITC’s work.  Inspired by the existing work on women and micro-finance, we now need to look at women and global and regional supply chains; the impact of effective trade facilitation procedures on women traders, especially in the informal sector; and the opportunities which deeper regional integration can offer to the economic livelihoods of women. Through your extensive network you can produce a series of evidence-based analysis that will be of great value added.

I also want to commend ITC for the work it has been doing, internally, to improve its priority setting and programme delivery.  At a time where reports are that ODA is declining, where donors are assessing their support for various multilateral initiatives but where demand from developing countries, especially from LDCs, for the services provided is increasing, there must be concrete efforts to show value for money. Showing impacts and results is a "must".

The implementation of Results-Based Management including the development of the conceptual framework and corporate log frame, will allow ITC to monitor and evaluate the impact of its projects on the ground in developing countries, as well as to monitor and evaluate its own effectiveness. This is the most convincing tool that you can use for fundraising in the current crisis- that your programmes and projects deliver and that ITC, as an organization, works. 

Patricia, the mid-term evaluation of ITC has shown what works and what needs to be amended. This is a useful foundation to build a dialogue between donors and partners to begin to design future projects as well as to ensure adequate funding for this projects will be available. I trust that in the year ahead you will devote your energy to this.

Thank you for your attention.