Bridges Weekly Trade News Digest • Volume 8 • Number 36 • 27th October 2004
WTO, IMF, World Bank Meeting Stresses Role Of Flanking Measures
A WTO General Council (GC) meeting on coherence, held on 22 October, took stock of the cooperation and coherence among the three major international economic institutions: the WTO; World Bank; and the International Monetary Fund (IMF). The heads of the organisations addressed delegates on coherence, and delegates made statements on the topic. The WTO Secretariat circulated a background paper on coherence (WT/TF/COH/S/9), pointing to the critical importance of agriculture and highlighting concerns relevant to institutional cooperation including on policy advice, trade-related technical assistance and capacity building and adjustment assistance.
Supachai highlights TIM, the cotton initiative and trade facilitation
Referring back to the last GC meeting on coherence on 13 May 2003 (see BRIDGES Weekly, 14 May 2003). WTO Director-General Supachai Panitchpakdi highlighted three concrete areas of progress. These were the IMF Trade Integration Mechanism (TIM) providing financial assistance to help low-income developing countries cope with adjustment difficulties arising from loss of trade preferences in the Doha Round and the elimination of textile quotas in 2005; WTO work with the IMF and the World Bank and the cotton initiative; and cooperation on trade facilitation. Supachai suggested that extending the IMF and World Bank observership in the Trade Negotiations Committee would give them "…first-hand information on where their contribution to the success of the Doha negotiations can most usefully be made" and increase coherence. Supachai also underscored the growing value of technical work on coherence being carried out in the WTO Committee on Trade, Debt and Finance, singling out in particular trade financing and exchange rate volatility.
IMF Highlights importance of TIM
The IMF’s Managing Director Rodrigo de Rato stressed the need for a solution for "…countries vulnerable - for instance, to preference erosion or food terms of trade shocks - without damaging the opportunities for the many others - nor, over the longer term, themselves". The TIM, according to de Rato, addressed part of the. Bangladesh is the first country to benefit from the TIM to address balance of payment (BOP) difficulties arising from the removal of textile quotas under the Agreement on Textiles and Clothing (ATC). De Rato also highlighted the coherence aspect of IMF surveillance of trade policies of larger industrial economies (to assess their impacts on other, mainly poorer countries), trade-related technical assistance (mainly in customs administration and tariff-policy) and strengthened trade-related research.
Trade liberalisation not a "silver bullet" for development
While pointing out that trade liberalisation could be a force for poverty reduction, World Bank Chief James Wolfensohn cautioned that it was not a "silver bullet" for development and that the outcome depended on many factors, including prevalent distortions. Moreover, trade liberalisation created both winners and losers, meaning complementary governmental policies such as social safety nets to deal with side effects were important. Agricultural distortions in OECD countries, high levels of protection of manufactures, particularly in developing countries, as well as inadequate competition/regulation in services were examples of what Mr. Wolfensohn termed "inconsistencies between the trade and the development agendas". He also emphasised the importance of addressing supply-side constraints in developing countries.
Wolfensohn mentioned the Integrated Framework for Trade-related Technical Assistance as a key World Bank contribution towards coherence. He also named Bank participation and funding of the WTO-led Standards and Trade Development Facility (STDF), as well as stressing the importance an increase in World Bank trade facilitation projects. Further institutional cooperation was required, according to Wolfensohn, for the exchange of data and information on trade-barriers. Stating that non-transparent forms of protection — e.g., quotas, specific duties — made it difficult for developing countries to anticipate the impact of liberalisation, he called for mobilising funds to improve data quality and to make more and better trade-related data publicly available.
Nigeria Outlines Elements of a Beneficial Global Coherence Strategy
Several members intervened following the presentations by the WTO, IMF and World Bank. Issues raised included the need to make IMF conditionalities less stringent, as well as the importance of addressing supply-side capacity constraints and adjustment costs resulting from the Doha round as well as earlier trade rounds.
Nigeria, speaking on behalf of the Africa Group, stressed that "global coherence" meant creating an international environment that allowed Africa to attain its development goals and initiate development strategies. Nigeria said the policies of the three organisations, as well as of major trading blocs, should be consistent with these development goals. Nigeria then listed areas in the July package that the coherence mandate could deliver upon in a concrete manner. These included implementing recommendations on the development aspects of the Sectoral Initiative on cotton, the need for enhanced technical assistance support including on trade facilitation, and support, in grant form, for African countries to meet the adjustment costs. Taking note of the IMF’s TIM and the World Bank’s Doha Development Initiative, Nigeria emphasised that they could not substitute for the provision of enhanced market access for African countries and the removal of trade distortions. A Global Coherence Strategy, according to Nigeria, would provide the policy space for African countries to pursue trade and financial policies supportive of development goals, ensure that macroeconomic and stabilisation programmes were supportive of overall development goals, avoid cross-conditionalities in the WTO, World Bank and IMF policies and that African countries were not called upon to implement WTO-plus measures for trade and financial reform.
ICTSD reporting; "Bretton Woods chiefs underscore importance of Doha success for development", WTO NEWS, 22 October 2004.