TRADE POLICY REVIEW OF MADAGASCAR

Statement by Ambassador Peter F. Allgeier
U.S. Permanent Representative to the WTO

Geneva,
April 2, 2008

Thank you, Chair. 

The United States would like to welcome the delegation from Madagascar headed by Minister of Economy, Trade and Industry Ivohasina Razafimahefa, on the occasion of Madagascar’s second WTO Trade Policy Review.  We thank Minister Razafimahefa for his comprehensive report and for the excellent written reports prepared by the Government of Madagascar and the WTO Secretariat.  We also thank Ambassador Mohammed Loulichki of Morocco for his valuable insights as discussant.
 
The United States commends the progress Madagascar has made since its first review in 2001.  Madagascar's macroeconomic fundamentals have improved considerably, and it has continued to implement its program of economic and structural reforms, including fiscal reforms and privatization of state-owned companies. We hope that Madagascar will continue to choose the path of trade liberalization and, especially, policies founded on transparency.

The African Growth and Opportunity Act (AGOA) is the cornerstone of the U.S. Government’s trade and investment policy towards Madagascar and sub-Saharan Africa.  AGOA is aimed at promoting free markets, expanding trade and investment, stimulating economic growth, and facilitating integration into the global economy. 

In 2007, Madagascar’s exports to the United States, under AGOA and MFN zero duties, were valued at $268 million, representing 95 percent of its total exports to the United States.  AGOA-related trade and investment in Madagascar has been concentrated in the textile and apparel sector, but significant diversification efforts are under way, particularly in the agricultural sector.

Helping African countries to improve their capacity to trade and to make the most of the opportunities afforded by membership in the WTO and under AGOA have been a major focus of U.S. Trade Capacity Building programs.  The United States, through USAID, is providing a wide range of support to least developed countries, including Madagascar, through the Integrated Framework initiative. 

Overall, U.S. trade-related assistance to Madagascar during 1999-2007 amounted to $74.4 million.  It was directed toward the implementation of WTO Agreements including agriculture, SPS, TBT and customs valuation.

Another important way that the United States is bolstering Madagascar’s efforts is through trade capacity building contributions by the Millennium Challenge Corporation.  We congratulate Madagascar for being the first country to sign a Millennium Challenge Account (MCA) Compact nearly three years ago.  The Compact provides nearly $110 million in grants for Madagascar to implement various economic activities in the areas of financial services and agribusiness investment.  We would like to continue working with you to support political and economic reform efforts and to strengthen its integration into the global economy.

In terms of trade policy, since 2001, Madagascar has eliminated many import taxes and simplified, reduced, and bound tariffs.  Under its privatization program, banking, fuel distribution, telecommunications, cotton, sugar, airlines, railways, and ports have completely or partially come under private ownership.  The government has revised its Investment Code and created the Economic Development Board of Madagascar (EDBM) in November 2006.  Madagascar’s combined efforts have helped improve the country’s economic environment, encouraging more foreign direct investment and trade.

Madagascar's participation in the multilateral trading system remains somewhat limited.  Transparency, a core tenet of the WTO, needs greater attention.  We urge Madagascar to engage more actively in the multilateral trading system and encourage Madagascar to focus on implementing the WTO Agreements, including Customs Valuation, SPS and TBT, especially their notification requirements.  Madagascar’s intellectual property rights regime needs strengthening using the TRIPS Agreement as a blueprint.  We encourage Madagascar to consider becoming an observer to the WTO Committee on Government Procurement. 

Services trade is particularly important to the Madagascar economy, representing around 57 percent of GDP in 2006.   Madagascar’s GATS commitments are limited to a few sectors.  We urge Madagascar to make new services commitments, to improve its investment climate, infrastructure and competitiveness.  Additional commitments could pave the way for new investment, especially in key areas of infrastructure.
 
Stronger multilateral commitments by Madagascar through extension of its tariff bindings to more non-agricultural products, lower bound rates, and more comprehensive GATS commitments will reinforce the progress Madagascar has made in liberalizing its trading regime and making it more transparent.  Such a climate would help Madagascar attract capital.

In sum, the United States commends the progress Madagascar has made in liberalizing its trading regime.  These trade policy reforms, backed by structural reform and macroeconomic stabilization, will enhance Madagascar’s business climate and reduce supply constraints. These types of actions, combined with the significant benefits from a meaningful conclusion to the Doha Round, can bolster Madagascar’s economy.
 
The United States appreciates the opportunity to participate in this review of Madagascar’s trade policy, and we look forward to continuing our dialogue and cooperation in coming years.