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Review of EAC Members Industrial Policies: Are they in line with the WTO G90 Special and Differential Treatment proposals?

At the meeting, East African WTO delegates reviewed national Industrial policies to ascertain the extent to which they have adopted policies and measures in line with the G90 proposals in the Trade Related Investment Measures (TRIMs) Agreement.

There is renewed interest in the role of industrialisation to promote sustainable economic growth and development (also reflected in goal 9 of the sustainable development agenda 2030). According to the UNCTAD Trade and Development report 2016 this impetus is due to a number of factors that include the following:

  • Many developing countries have failed to deepen and diversify their existing industrial capacity in a more open global economy
  • It is generally perceived that export-led growth strategies in developing countries face more constraints than in the past due to slower growth and global demand, especially from industrialised countries
  • Many developing countries remain vulnerable to external trade and financial shocks
  • Windfall gains from primary exports as a result of the commodity price boom during the first decade of the 2000’s came to an end
  • For LDCs the situation is more alarming given that their share of global exports remains very low at 0.98 percent.

The volatile prices of primary commodities on which many developing countries and LDCs are reliant have made them vulnerable to external shocks. Industrialisation is therefore critical as a means of addressing these challenges given its benefits such as stable prices, increased productive capacity through technological changes and by providing backward and forward linkages with other sectors of the economy.

From the foregoing, the meeting deliberated on the extent to which EAC Members have adopted policies and measures in line with the G90 proposals in the Trade Related Investment Measures (TRIMs) Agreement, which seek to ensure special and differential treatment for certain WTO members so as to allow for implementation of the requisite policies to promote and enhance industrialisation in their countries.

Key highlights from the deliberations were as follows:

  • Historically industrialisation has been a prerequisite step towards development and developed countries first industrialised before leveraging other sectors such as services, therefore despite current views that development could be attained through non-traditional means, facts prove otherwise. Industrialisation remains the key path way to development
  • Policy space will definitely be required for the small developing countries and LDCs to implement policies that spur their industrialisation, which may entail protection of infant industries, provision of subsidies to strategic industrial sectors and other similar initiatives
  • Another critical aspect that governments will need to consider is provision of support for research and development (R&D). This is critical for ensuring sustainable innovations, but also quite costly hence the need for government support
  • There is also need for a coordinated approach within government agencies and Ministries to ensure that policies are effectively implemented and produce the desired impacts
  • In addition to policy, financing remains a major challenge given that majority of enterprises in the industrial sector are MSMEs, which often face challenges in accessing finances from commercial banks. It will therefore be necessary for governments to either establish specific development banks, or some other mechanisms through which MSMEs can access financing on favourable terms to facilitate their industrialisation efforts
  • Ultimately the G90 proposals on TRIMs are no doubt a necessity for the small developing countries and LDCs in their pursuit of industrialisation.

Delegates expressed their appreciation for the meeting that provided insightful information on the state of industrialisation policies in EAC, which will be useful in the relevant negotiations. It was decided that the next Forum meeting will deliberate more on this issue, delving more into specific measure that have been implemented under the reviewed policies e.g. local content requirements, etc.

 

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