Connections
Paper series on transatlantic trade and development policy issues
Analysis
April 22, 2011
Summary: This brief examines
the nexus between trade and
development in poor countries
in sub-Saharan Africa and
elsewhere, with a focus on
the trade, infrastructure, and
food security pillars in the
Seoul action plan. It highlights
positive elements in that
action plan and makes specific
recommendations on how
the G20 could contribute to
advancing them.
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A G20 Agenda for Trade and Development
in Poor Countries
By Kimberly Ann Elliott
We strongly believe that trade can be
an effective tool for reducing poverty
and enhancing economic growth in
developing countries, LICs [low-
income countries] in particular. To
support LIC capacity to trade, we
welcome the adoption of the Multi-
Year Action Plan on Development.
—The Seoul Summit Document
The United Nations LDC [Least
Developed County] IV Conference in
Istanbul in May of this year is a key
opportunity to lay a foundation for
the growth that is needed to promote
and sustain progress on the Millen-
nium Development Goals. The G20’s
multi-year action plan for develop-
ment, if effectively and expeditiously
implemented, will provide important
inputs into that process.
Trade is just one of the nine pillars
in that plan, but several others are
closely linked to using trade more
effectively as a stimulus to growth
and development in poor countries.
These include the infrastructure
and food security pillars identified
as priorities this year by the French
government, which currently holds
the G20 chair. Fewer trade distor-
tions and deeper markets would play
an important role in improving food
security, while better infrastructure
is needed in many countries to lower
trade costs. Targeted safety nets to
protect the most vulnerable, as called
for in the sixth pillar on “growth with
resilience,” including those addressing
food security, are also a more efficient
and effective response to external
shocks than trade measures. In addi-
tion, investment in human capital is
clearly needed for trade and economic
growth generally, and trade provides
both technology and broader markets
that can make private investments
more profitable and boost job
creation.
This brief examines the nexus
between trade and development in
poor countries in sub-Saharan Africa
and elsewhere, with a focus on the
trade, infrastructure, and food secu-
The Pillars of the Seoul
Multi-Year Action Plan
1. Infrastructure
2. Human resource development
3. Trade (enhance trade capacity
and access to markets)
4. Private investment and job
creation
5. Food security
6. Growth with resilience (social
protection programs)
7. Financial inclusion
8. Domestic resource mobilization
9. Knowledge sharing
Analysis
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rity pillars in the Seoul action plan. It highlights positive
elements in that action plan and makes specific recom-
mendations on how the G20 could contribute to advancing
them.
Trade and Market Access
The trade pillar in the Seoul action plan begins with a
commitment “to make progress towards duty-free and
quota-free (DFQF) market access for the least developed
country (LDC) products in line with Hong Kong commit-
ments.” Rich countries initially pledged to do this in the
Millennium Declaration in 2000. Over the subsequent
few years, the European Union (EU), Norway, Canada,
Australia, and New Zealand implemented programs that
approached that goal, albeit with a few product exclusions
in some cases and restrictive rules of origin in others, espe-
cially Europe, a weakness that was addressed by the EU last
year.1
The World Trade Organization’s ministerial meeting in
Hong Kong in 2005 reiterated the commitment to DFQF
market access and called on developing countries “in a
position to do so” to also provide such access, although
with more flexibility in implementation. At the same time,
U.S. negotiators narrowed the commitment by insisting
on only 97 percent of tariff lines as the explicitly defined
objective. The Hong Kong communiqué was followed by
expanded preferences for LDCs in Japan, Korea, Switzer-
land, Turkey, India, China, and Brazil, albeit usually with
more restrictions and exclusions than in the programs
announced earlier in the decade. The United States intro-
duced a nearly DFQF preference program for sub-Saharan
Africa in 2000 and expanded preferential access for Haiti
incrementally over the decade, but the U.S. Generalized
System of Preferences (GSP) offers preferences on only
about 80 percent of tariff lines for 15 Asian LDCs. More-
over, the U.S. GSP program was not renewed by Congress
at the end of 2010 for reasons ranging from the broadly
philosophical to the picayune (a two-company fight over
sleeping bag imports).2
Kimberly Ann Elliott, Opening Markets for Poor Countries: Are We There Yet? CGD Work-
1
ing Paper 184, Washington: Center for Global Development, October 2009. After that
paper was published, the EU changed the rules of origin for LDCs to, among other things,
allow eligible exporters to use imported fabric and still have the resulting apparel items
enter duty-free (http://europa.eu/rapid/pressReleasesAction.do?reference=MEMO/10/
588&format=HTML&aged=0&language=en&guiLanguage=en). The new rules went into
effect at the beginning of this year (http://ec.europa.eu/taxation_customs/customs/
customs_duties/rules_origin/preferential/article_777_en.htm).
2
http://www.hktdc.com/info/vp/a/intmk/en/1/2/1/1X07DGZP/USTR-Still-Mulling-Pos-
sibility-Of-Removing-Sleeping-Bags-From-GSP-Coverage.htm, accessed on April 8, 2011.
2
Research suggests that full
[product] coverage by major
emerging markets could double or
triple the benefits for some LDCs,
particularly in Africa, compared to
full coverage from rich countries
alone.
The U.S. market remains the world’s largest, but that is
offset to some degree by the fact that many developing
country markets, including the large ones, are growing
faster than the United States — and that makes the G20
an important forum for improving market access for the
poorest countries. But how? A Center for Global Devel-
opment working group, comprised of 19 members from
around the world, including North America, Europe,
Japan, Turkey, India, and Brazil, endorsed three key
principles for meaningful duty-free, quota-free market
access programs: full product coverage; flexible rules
of origin; and stability, including making the programs
lengthy or even permanent. The working group called on
rich countries to implement these principles immediately
and emerging markets to do so by 2015, the target date for
meeting the Millennium Development Goals.3 Research
suggests that full coverage by major emerging markets
could double or triple the benefits for some LDCs, particu-
larly in Africa, compared to full coverage from rich coun-
tries alone. And LDC imports are generally one percent or
less of total imports in both sets of countries.4
Concrete steps by the G20 could begin with an endorse-
ment of the principles for meaningful DFQF market access.
This is crucial because substantial research, illustrated
in Figure 1, shows that excluding three percent of tariff
3
The working group report and other information may be found at http://www.cgdev.
org/section/initiatives/_active/reformingtradepreferences/global_trade_preference_re-
form.
4
Antoine Bouët, David Laborde Debucquet, Elisa Dienesch, and Kimberly Elliott, “The
Costs and Benefits of Duty-Free, Quota-Free Market Access for Poor Countries: Who and
What Matters.” CGD Working Paper 206, Washington: Center for Global Development,
March 2010.
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Figure 1: Distribution of Tariff Revenue Collected on WTO LDCs Exports cient customs hold up trade for days
by Destination Market or weeks, will find it difficult to take
advantage of preference programs.
Building adequate physical infra-
structure, notably for transportation,
energy, and telecommunications,
will take years and billions of dollars.
Given the magnitude of the needs,
the Seoul action plan calls in the first
instance for a needs assessment and a
comprehensive plan for infrastructure
from the multilateral development
banks. A high-level panel is to report
at the summit in Cannes on mecha-
nisms for scaling up and diversifying
financing for infrastructure, as well as
commenting on the feasibility of the
MDB plan. But soft infrastructure,
such as customs, should not be ignored
and, in many cases, trade costs can
be significantly lowered with modest
investments in trade facilitation and
capacity building.
Note: Theoretical tariff revenue is computed as the product of actual trade times
the applied preferential tariff. With the full implementation of Everything But The experience of many African coun-
Arms in September 2009, LDCs’ exports do not face residual protection in the tries over the past decade illustrates
EU market. all too well that market access alone is
not enough. Despite having duty-free
Source: Valdete Berisha-Krasniqi, Antoine Bouët, David Laborde, and Simon Mevel, The Development Promise: Can the
Doha Development Agenda Deliver for Least-Developed Countries? IFPRI Note 14, Washington: International Food Policy access for all but a few (albeit impor-
Research Institute, 2008. tant) agricultural items, with flexible
rules of origin for apparel, the U.S.
lines removes any benefit, as do restrictive rules of origin.5 African Growth and Opportunity Act
G20 countries should then commit to provide baseline (AGOA) did little to sustainably promote African exports.
reports for the Cannes summit on whether they have such As shown in Figure 2, nearly all the exports under AGOA
a program and to specify divergences from these core are petroleum, and most of that is explained by the increase
principles. Even without committing to specific improve- in the price of oil. Lowering trade barriers is a necessary
ments, the glare of the spotlight would provide incentives but not sufficient step in expanding LDC exports. The
for reform. This is also an opportunity for the emerging World Bank reports, for example, that while the strongest
market members of the G20 to take a leadership role, with reformer on trade facilitation in recent years has been sub-
or without American cooperation. President Sarkozy is in a Saharan Africa, that region still lags on most indicators and
good position to rally the G20 on this issue, given that the the estimated cost to export is twice as high as in East Asia
EU has already complied with the working group prin- and nearly 50 percent larger than the cost in South Asia.6
ciples in its Everything But Arms program. Some of the difference is explained by the large number of
landlocked countries in Africa, but by no means all of it.
Trade Capacity Building and Infrastructure
Even with duty-free, quota-free access, exporters in coun- Thus, the Seoul action plan also calls on G20 members to
tries without paved roads or where red tape and ineffi- deliver on their Aid for Trade commitments. But, given

5
Ibid. 6
See http://www.doingbusiness.org/ExploreTopics/TradingAcrossBorders/.

3
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Figure 2 U.S. Imports under AGOA
60000
50000
40000
Million dollars
30000
20000
10000
0
2001 2002 2003 2004
Petroleum (SITC 33) Apparel (SITC 84)
Source: U.S. International Trade Commission, Dataweb
the need to also improve soft infrastructure, delivery
mechanisms should emphasize both country owner-
ship and mutual accountability, as recommended in two
recent Center for Global Development publications. The
first proposal is to create a “doing business facility” that
would reward countries taking steps to facilitate business
creation and growth by providing additional resources to
expedite reform. A second proposal calls on donors to
7 and to mitigate its effects, especially on the poorest. More-
help reforming governments underwrite “service guar-
antees” for businesses. These guarantees would be similar
to existing investment risk insurance products provided
by the U.S. Overseas Private Insurance Corporation or
the World Bank’s International Finance Corporation. A
key difference, however, is that they would be available to
local, as well as foreign, investors and could cover areas
such as customs clearance, licensing, and power supply. By
providing some assurance that reforms will be sustainable,
these proposals would help draw private investors to Africa
and reassure donors that their aid dollars are being used
effectively.
7
See http://www.cgdev.org/content/publications/detail/1423783.
8
See http://www.cgdev.org/content/publications/detail/1421337.
Trade, Food Security, and Resilience
120
Just three years after food prices spiked
to levels not seen since the 1970s, food
prices are again rising sharply and
100
millions of poor people are threat-
ened with hunger and malnutrition.
Millions more could find themselves
80 falling back into poverty. Two price
spikes of this magnitude just three
years apart, caused at least in part by
Dollars per barrel
60 extreme weather events, highlight
the increasing volatility that climate
change is likely to bring to agricultural
40 markets.9 It is too soon to be sure, but
the steady rise in food prices since
2000 could also signal a reversal of the
20 decades-long decline in commodity
prices, with populations growing and
incomes rising faster than crop yields
2005 2006 2007 2008
0
(Figure 3). These events underscore
All other Crude oil price
the fact that governments and donors
need to address both the short- and
long-run aspects of food insecurity.
Policies to promote food security also
range along a spectrum, from ensuring
that families have enough of the right kinds of food to
maintain health, to making certain that global supplies are
adequate for a growing and richer population.
For this year, given the renewed price spikes, it makes sense
for G20 members to focus on policies to temper volatility
over, if the G20 process can contribute to locking in and
institutionalizing some of these policies, it would promote
food security over the longer run as well by helping to
avoid or mitigate the effects of future crises. One useful
idea that seems likely to be adopted is a Joint Organizations
Data Initiative for Food Security, which would build on
existing capacity at the Food and Agricultural Organization
8 and elsewhere, and improve capacity in countries where
it is weak, to improve the collection and dissemination of
data on commodity production, consumption, and stocks.10
9
The (second) draft multi-agency paper requested by the G20 does not find an increase
in volatility for the entire period 1970-2010, but does find that average volatility was
higher in the 2000s than in 1980-2000. See “Price Volatility in Food and Agricultural
Markets: Policy Responses,” Policy Report including contributions by FAO, IFAD, OECD,
WFP, the World Bank, the WTO, UNCTAD, IFPRI, and the UN HLTF, second draft, link avail-
able at http://ictsd.org/i/news/bridgesweekly/102877/ accessed on April 8, 2011.
10
Ibid.
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Figure 3 World Food Price Index, 1960-2010 Doha Round appears dead, despite
solemn pronouncements to the
contrary, so the question becomes
400
Constant 2000$ whether the G20 can find the political
Current$ will to move forward in at least some
350
of these areas without a binding legal
agreement.
300

Internally, countries also often respond

250 to price spikes with policies that are
costly and inefficient, such as price
controls or broad subsidies or tax cuts
2000 = 100

200
that help the rich as well as the poor.
150
A better approach to food security at
the household level is to develop safety
100
nets that provide targeted cash trans-
fers to the poor. Brazil and Mexico,
50
among others, already have experience
with effective conditional cash transfer
programs and they could provide
0
1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 technical assistance to help vulnerable
countries create or expand safety nets.
Source: World Bank, Databank, GEM Commodities, online
G20 members such as India and South
Africa also have experience to share
Improved commodity market information would reduce regarding the use of biometric identifi-
uncertainty and could dampen speculation from driving cation and e-banking technologies to make the implemen-
prices to levels unsupported by fundamentals. tation of cash transfer programs cost-effective and more
corruption-resistant.11
Trade will also play an increasingly important role in
meeting the challenges of growing demand and the effects
of climate change. Even with significant increases in
Trade will also play an increasingly
agricultural investments in developing countries, many of
them will not be able to achieve self-sufficiency and will important role in meeting the
continue to rely on imports, making deeper and less-
distorted markets a key element in food security for them. challenges of growing demand
Individual country actions to restrict exports or suddenly
increase imports exacerbate price spikes for those unable to
insulate themselves, as well as reducing incentives for their
and the effects of climate change.
own farmers to increase production in the future. Thus,
quickly concluding the Doha Round would help by elimi- Over the longer run, the food security pillar of the Multi-
nating export subsidies and reducing other trade-distorting Year Action Plan for Development adopted in Seoul
agricultural subsidies, thereby providing incentives for calls for consideration of creative, results-based financial
increased trade and production in developing countries. mechanisms to stimulate innovation in developing country
The benefits of such an agreement could be multiplied if agriculture and engage the private sector. The Canadian
it were expanded to discipline export restrictions, which government is taking the lead on this issue and working
were a major source of the spikes in rice markets in 2008, with the World Bank and others to develop a process
go further than the current draft in reforming food aid 11
For an introduction to this research, see this note and the associated powerpoint
practices, and address biofuel subsidies. Unfortunately, the presentation: http://blogs.cgdev.org/globaldevelopment/2010/10/biometrics-identity-
and-development.php .
Analysis
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for identifying a pilot project using this approach. It is
hoped that a concrete proposal for moving forward can be
presented to the leaders for endorsement at the summit
this fall.12
Conclusion
Ending poverty and hunger, improving child and maternal
health, achieving universal primary education, and the
other Millennium Development Goals are the outcomes
that we ultimately hope to see from the development
process. Equitable economic growth is an essential vehicle
for getting there and the multi-year action plan for devel-
opment adopted by the G20 in Seoul points in the right
direction. Trade, including through regional integra-
tion, is a theme linking several of the action plan pillars.
But improved market access in rich and rapidly growing
markets can only contribute to job creation and private
sector growth if countries have adequate infrastructure and
supportive policies in place. More secure and less distorted
trade flows would also be an important contributor to food
security. Given the growing importance of South-South
trade, it is time for these issues to migrate from the G8 to
the G20.
12
Kimberly Ann Elliott, Pulling Agricultural Innovation and the Market Together. CGD
Working Paper 215, Washington: Center for Global Development, June 2010.
About the Author
Kimberly Ann Elliott is a senior fellow at the Center for Global
Development and the author or co-author of numerous books and
articles on trade policy and globalization, with a focus on the political
economy of trade and the uses of economic leverage in international
negotiations.
About GMF
The German Marshall Fund of the United States (GMF) is a non-
partisan American public policy and grantmaking institution dedi-
cated to promoting better understanding and cooperation between
North America and Europe on transatlantic and global issues. GMF
does this by supporting individuals and institutions working in the
transatlantic sphere, by convening leaders and members of the policy
and business communities, by contributing research and analysis
on transatlantic topics, and by providing exchange opportunities to
foster renewed commitment to the transatlantic relationship. In ad-
dition, GMF supports a number of initiatives to strengthen democra-
cies. Founded in 1972 through a gift from Germany as a permanent
memorial to Marshall Plan assistance, GMF maintains a strong
presence on both sides of the Atlantic. In addition to its headquarters
in Washington, DC, GMF has six offices in Europe: Berlin, Paris,
Brussels, Belgrade, Ankara, and Bucharest. GMF also has smaller
representations in Bratislava, Turin, and Stockholm.