WTO Working Group On Trade, Debt And Finance Discusses Coherence With IMP And World Bank
Meeting in Geneva on 17 December, the Working Group on Trade, Debt and Finance focussed on the issue of coherence between the multilateral trading system and international financial institutions such as the World Bank and the IMF. Participants considered a background paper entitled "toward greater coherence" (WT/WGTDF/W/17, accessible at http://docsonline.wto.org). The secretariat's paper outlines prospective areas of coherence including: investment, government procurement, competition policy, good governance and business environment. The paper was not well received among some developing countries. Brazil, for one, was dissatisfied because the secretariat paper did not mention the issue of credit for autonomous liberalization in the services negotiations. Autonomous liberalization has usually been recommended or mandated by the IMF and World Bank when granting structural loans, and has also been mandated in the GATS. Brazil saw the omission of autonomous liberalisation in the secretariat paper as symptomatic of the lack of coherence with the Bretton Woods institutions. Korea cited an example of incoherence regarding IMF supported adjustments in its financial sector, now challenged by the EU under the WTO as being an actionable subsidy. Other countries, such as Pakistan and Japan, cautioned that the Working Group already has a number of issues on its agenda and should not be creating new ones. The EU reportedly was supportive of the secretariat paper, which some observers said has many similarities with an earlier EU paper presented to the group.
Initiatives by the Africa Group, Cuba
An Africa Group proposal (WT/WGTDF/W/16, accessible at http://docsonline.wto.org) was due to be discussed in the meeting, however all African delegates were absent because of the discussions on TRIPS and Health. In its paper the Africa group calls for meaningful market access for products of interest, financial support for addressing trade supply concerns and policies to reduce price risks on commodities and currency exchange risks. It presents specific recommendations to the fifth Ministerial Conference, including requesting the Working Group to: review existing relevant WTO Agreements to address financial instability and external indebtedness; identify ways and means of contributing to the diversification of value- added exports; serve as the WTO body tasked with the monitoring of the implementation of the outcome of Monterey Summit; and provide for the exchange of experience on the impact of capital account liberalization on exchange rates and competitiveness.
Cuba presented a paper a paper at the meeting (WT/WGTDF/W/18, accessible at http://docsonline.wto.org), which identifies the following main concerns for developing countries regarding trade and finance: exchange rate fluctuation; lack of financial sources for trade expansion; adjustment problems in the balance of payments; and a lack of links between the macro-economic policies promoted by IMF and trade policies. Regarding trade and debt, Cuba indicated the necessity of an integrated approach that would address limitations with regard developed country market access, as well as the need to retain some tariff protection for developing infant industries. The submission also noted the need to create mechanisms to deal with debt renegotiation processes. The paper proposes that the Working Group continue its activities from a multidimensional perspective, seeking to, inter alia, identify solutions for export diversification, obtaining market access based on special and differential treatment, and introducing a monitoring mechanism for commitments to finance development such as those made at the Financing for Development summit.
Chair Hernando José Gómez presented his summary of the discussion, noting with regard to trade and finance that participants had stressed the value of keeping markets open world-wide in periods of financial crisis, and the need to improve the stability and security of sources of trade-financing. On trade and debts, he noted that non- discriminatory reduction of trade barriers in the context of the current WTO negotiations, could make a significant contribution to a durable solution for external indebtedness, especially for developing country exports. He also stated that trade policy reform in indebted countries has to be supported by pro-growth policies. Background
The Working Group was established at the Doha Ministerial Conference in November 2001, with the mandate to examine the relationship between trade, debt and finance in the WTO, because developing country Members in particular noted the need for greater coherence in global economic policy-making. The group has met three times previously this year, on 15 April, 11-12 July, and 30 September, with Ambassador Hernando José Gómez of Colombia serving as Chair. The work focused on the relationship between trade and finance and the relationship between trade and debt, and relevant institutions, including the Bretton Woods institutions and the UN regional economic commissions made presentations on these issues. The Working Group is due to report on its progress at the fifth Ministerial Conference in September 2003.