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> Supachai Panitchpakdi’s speeches
remarks by the General Council Chairman
by the Director-General
by the World Bank President
on General Council
Mr. Chairman, Dr. Supachai, distinguished Delegates,
It is a pleasure to be here with you and Jim Wolfensohn to discuss coherence
in international policymaking. Recently, my predecessors have already
underlined the importance we attach to your success in turning the Doha
Development Agenda into reality. Today I want to review our progress in
assisting your efforts and assure you of our continued support.
Having had to reconcile trade and finance responsibilities in my previous
job, I have come to appreciate first-hand the virtues but also the
challenges of “coherence.” My experience at Cancún, and the years leading up
to it, have hammered home two important lessons:
First, it demonstrated that — more than ever before — the concerns of every
country, large and small, are shaping the debate on the multilateral trading
system. Despite the inevitable complications for decision-making, this is a
precious achievement. The August framework decisions reflect this
inclusiveness of the Round, although of course much work remains to be done.
Second, Cancún showed that the full aspirations of a “development round”
cannot be met within any one policy area alone, be it trade, development or
finance. By its nature, a development round calls for action across
different areas of international policymaking. We need to work together on
what is a very rich agenda.
I will take up each of these points in turn, since I believe that they go to
the heart of the coherence agenda over the coming period.
An Inclusive Global Trading System
The slow progress of the Doha Round reflects, in part, the increasing
maturity of the multilateral system. Countries that had no voice before are
finding their voice. They are now defining their interests, which is not
only natural but welcome. I firmly believe that a multilateral trading
system in which all countries have an active voice is both feasible and
desirable. But it also imposes discipline on all countries.
In a balanced and successful multilateral system the largest countries must
show leadership. Many of the rules and the structure of protection of
today’s multilateral trading system have been written in past rounds when
few developing countries participated actively. The result has been that
some areas of particular export interest to many developing countries, such
as agriculture and light manufactures, have not found their way to the
centre of the negotiations. To achieve greater balance, the large countries
— both developed and developing — will have to assume the lead in tackling
the most distortionary aspects of their trade regimes. That is the promise
of the Millennium Declaration, of Doha and of the Monterrey Consensus — and it
is now time to act.
But other countries must play their part too and fully engage in the
multilateral trading system. Engagement means taking on both rights and
obligations. An excessive focus on rights leads to self-exclusion and will
eventually undermine the progress made by developing countries in finding
their voice and in beginning to shape the system itself. To my mind, it
would take the “development” label away from the Doha Development Agenda.
In practice, countries around the world have made a clear choice to
integrate into the world economy. Over the past two decades, across much of
the developing world, trade barriers have come down. This has yielded
benefits: the developing countries’ share in global trade has risen by
around 10 percentage points since 1990, to more than 30 percent today. In
trade negotiations, opening up is called a “concession,” but it should be
seen for what it is: a step that benefits societies that take it. And
multilateral liberalization offers still greater gains. Carrying out further
liberalization within the framework of the WTO would provide the additional
benefits of transparency and predictability, and would give countries
leverage in negotiations.
The Doha Development Agenda has set ambitious goals. Its aim is not only to
reduce trade barriers and strengthen rules, but to promote growth and
poverty reduction in developing countries. Trade has indeed been a powerful
force driving growth, and growth has produced unprecedented reductions in
global poverty. But clearly, the link between trade policy, trade and
long-run growth is not automatic, but requires a supportive environment.
At the most general level, coherence in global policymaking should aim to
promote a strong global economy. If global growth is weak, trade integration
cannot make its contribution to generating sustained growth in the
developing countries. The recent, robust recovery in the world economy has
been encouraging. But its longer-term prospects would be improved further by
progress in addressing global current account imbalances. This is a global
problem and the solution requires efforts by many countries.
But even with a favorable global environment not all countries have been
able to take full advantage of the opportunities of global trade. And some
have been reluctant to face the risks and adjustment costs of greater
integration. Coherence in the work of the WTO, the World Bank and the IMF
can play a critical role in meeting these challenges.
At the IMF, we have been doing all we can to support countries’ efforts to
integrate into the multilateral trading system. Earlier this year, Anne
Krueger presented our new initiative to you, the Trade Integration
Mechanism, which we hope will help reassure those countries concerned about
the short-term costs of trade liberalization. In our view, a solution had to
be found for countries that are 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 Trade Integration Mechanism addresses part of this problem. It gives
affected countries an additional lever in dealing with vulnerabilities,
while allowing developing countries as a whole to reap the benefits of
improved conditions for their exports. The mechanism is directed at the
possible balance of payments impact of liberalization by other countries,
agreed in the context of the WTO or implemented unilaterally on a
non-discriminatory basis. Under the mechanism, the IMF will support members
in identifying the nature and size of these shocks and in designing
appropriate adjustment policies. The IMF will also provide financial
assistance to help address any related balance of payments problems.
In July, Bangladesh became the first country to obtain funding in accordance
with this mechanism. This will help Bangladesh address the expected pressure
on its balance of payments from the forthcoming liberalization of textiles
quotas under the Agreement on Textiles and Clothing.
Fund surveillance has also evolved in response to the new challenges that
have been highlighted by the Doha Round. Since the start of the Round there
has been a significant focus, in Article IV consultations, on trade policies
in the larger industrial economies that have a wider impact on the prospects
for other, especially poorer countries. In its review of surveillance last
July the Fund’s Executive Board reconfirmed and welcomed this approach. We
have also moved to assess and discuss trade policies increasingly in a
regional context. This has been particularly true of our work in Africa.
Trade policies formed an important part of the recently published
Sub-Saharan Africa Regional Economic Outlook. The report finds that Africa
can benefit from regional integration initiatives, if well-designed and in
the context of multilateral liberalization, and urges corresponding efforts
to promote greater participation in global trade.
Technical assistance is another area in which the Fund has, since the last
General Council meeting on Coherence, further stepped up its capacity to
provide support. The IMF has provided trade-related technical assistance in
two main areas, customs administration and tariff policy — the latter almost
always in the context of a wider tax reform. Progress on both fronts is
commonly needed to secure an effective liberalization of trade while
safeguarding public revenues. Fund experts have fielded 25 30 missions in
these areas in each of the last couple of years. New regional technical
assistance centers in Africa and the Middle East, supplementing the ones we
have in the Caribbean and the Pacific Islands, have allowed us to move
closer to our member countries.
In this context, we would be happy to respond to the General Council’s call
for cooperation on trade facilitation as expressed in the August decision.
In fact, a first expert-level meeting took place yesterday here in Geneva to
assess the potential for support.
A final area that we have strengthened specifically with a view to the Doha
Round is trade-related research. Let me just mention to you some of the
results since they seem quite pertinent to a discussion of coherence in
One recent study had been requested by the Working Group on Trade, Debt
and Finance and reviews the impact of exchange rate volatility on trade. The
study concludes that, while exchange rate fluctuations have increased in
times of currency and balance of payments crises, there has not been any
increase, on average, in exchange rate volatility between the 1970s and the
1990s. And more importantly perhaps, there is no strong and robust evidence
that exchange rate volatility has a negative effect on trade flows. This
suggests that, from the perspective of enhancing trade, exchange rate
volatility may not be a major concern.
Another study examined preference margins and the possible impact of
preference erosion on developing country export revenues. It finds that
vulnerability to preference erosion is heavily concentrated in a sub-set of
products, especially sugar and bananas. Accordingly, assistance to help
countries cope with preference erosion can and should be closely targeted at
the countries at risk.
Let me briefly turn to cotton. The August framework agreements call for
consultations with the Fund and other agencies to direct resources toward
development of the economies where cotton has vital importance. We are, of
course, more than willing to join such consultations. The Fund has
traditionally played a major role in assisting developing countries in
dealing with the macroeconomic implications of commodities price or other
shocks, including in the cotton sector. Should such shocks have an adverse
impact on the balance of payments, Fund assistance could be delivered
through our regular instruments and policies — notably the Poverty Reduction
and Growth Facility.
Our working relationship with the WTO, at the management and staff levels,
continues to be excellent as highlighted in the Secretariat’s background
paper. Let me merely add that the effectiveness of our cooperation could be
further enhanced if Fund observership in the negotiating bodies created in
Doha were confirmed. By providing our staff with a more immediate sense of
the needs and demands of the WTO membership, observer status would make it
easier for us to respond and be supportive.
As this audience knows better than most, trade is a powerful tool for
progress. What is more, it is a means for people to help themselves.
Ensuring that the poor have every possible chance to participate in trade,
and directing our assistance to enable them to do so, is not only morally
right but makes economic sense. Removing the vestiges of protectionism is
not charity — it is in each country’s own interest to do so.
Success requires a clear commitment to the spirit of the rules-based
multilateral trading system and to more open trade regimes on the part of
all countries. Economic development and poverty reduction are served not
only by better market access abroad, but also — and perhaps above al l — by a
willingness to embrace trade as part of a domestic development agenda.
Coherence begins at home.
This larger vision has doubtless inspired the initiation of the Doha round.
Yet driving the round to a satisfactory conclusion requires determined
political leadership in order to provide the negotiators with the political
mandate for results. There must be a readiness to move beyond the
mercantilist exchange of concessions that has driven negotiations, and to
make progress in areas in which domestic political resistance has held back
progress in the past.
Mr. Chairman, working together the international community has an
opportunity through more open trade policies to promote development and help
the world’s poor. Financial uncertainties linked to reform should not have
to deter WTO members from engaging fully in the Doha process. This is where
the IMF intends to play its part.