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> Allocutions: Supachai Panitchpakdi
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Mr. Chairman, Dr. Supachai, my colleague,
Rodrigo de Rato, distinguished Delegates,
I am pleased to be in Geneva again, engaging with you all on a theme
that is dear to my heart: the topic of coherence in economic
policy-making. Almost a year-and-half has gone by since my last visit to
the WTO’s General Council for a similar meeting. These have been
momentous months for the multilateral trade system with the unfortunate
“detour” at the Cancun Ministerial and the recent good news on the
framework agreements reached on August 1st, that seem to put the Doha
Development Agenda back on track.
An Insecure World
This year, we are reporting record economic growth. And yet, somehow, we
feel less secure about the future. This, of course, is intimately
related to our concerns about terrorism and how the world is evolving.
The danger, however, is that in our preoccupation with immediate
threats, we lose sight of the longer-term and equally urgent causes of
our insecure world: poverty, frustration, and lack of hope.
The numbers are well known. For example, 2.7 billion people — more than
half the people in developing countries — live on less than $2 a day.
Of these, 1.1 billion earn less than $1 a day. If we want stability on
our planet, we must fight to end poverty.
The good news is that we know that development works. Over the last two
decades alone, the proportion of people in extreme poverty fell by
almost half – from 40 percent (1981) to 21 percent (2001). Life
expectancy has increased from 60 years (1980) to 64.6 (2002). And adult
illiteracy has been halved to 22 percent.
Trade and Poverty
Trade liberalization can be a force for poverty reduction, but the
ultimate outcome depends on many factors, including initial conditions
of the country undergoing reform, the nature of the reform, who the poor
are, and how they sustain themselves. Most studies confirm a positive
association between trade and growth, even though the magnitude of such
a relationship is controversial.
But it is important to recognize that trade liberalization is not a
“silver bullet” for development. Its limitations in part reflect the
many other distortions that often characterize developing economies.
Moreover, trade liberalization generates both winners and losers.
These considerations underscore the importance of complementary
governmental policies to deal with trade-liberalization side effects.
Implementation of social safety nets, trade-related institution-building
efforts, and initiatives to promote improved supply-side response (e.g.,
trade facilitation projects) are some of the options to be considered.
Multilateral trade negotiations: moving forward
The July package is an important step in the right direction. The next
stage of the negotiations will ultimately determine success or failure
in delivering on the promise of a development round. Therefore, it is
important to focus now on the substance of the agreements with a view to
ensuring that they have a pro-poor orientation.
We all recognize that the political calendar in some of the main trading
nations is not particularly conducive to bold political commitments in
the near future. Still, it is important to keep moving since signals of
progress in the multilateral front will help us to diminish the sense of
insecurity that I mentioned before.
The Coherence Nexus
The responsibility for achieving an ambitious result in the DDA
negotiations rests with WTO members. In pursuing their legitimate
national objectives, however, countries should keep in mind that
international spillovers from domestic actions can compromise coherence
at the international level. The best known example in this context
refers to agricultural policies in OECD countries and their impact on
Subsidies, trade protection and other types of support to agriculture in
high-income countries can significantly distort trade. Support to
agriculture in OECD countries, including that provided through import
barriers, runs at almost one billion dollars a day — more than five
times all development assistance. Phasing out interventions that distort
agricultural trade would lead to increases in annual income in
developing countries on the order of hundreds of billion of dollars in
the medium term with a potential significant impact on poverty.
This is not, however, just a North-South issue. Many developing
countries also follow protectionist policies in agriculture.
Agricultural trade barriers in middle-income countries, for example, are
often of the same order of magnitude as in rich countries.
While the gains from global reform of agriculture are large, we must
recognize that some countries now benefiting from preferential access
and/or those that are net food importers may be hurt. But these concerns
are not a reason to oppose liberalization by OECD nations — we must
bear in mind that the majority of the world’s poor live in countries
that do not receive trade preferences. Instead, this calls for carefully
designed and sequenced reforms in the countries concerned, complemented
by generous development assistance to facilitate adjustment alongside
effective mechanisms to safeguard the poor.
Distortions in agricultural trade, while the most glaring example of
policy incoherence, are not the only area where inconsistencies between
the trade and the development agendas can be found. It is worth pointing
Protection of non-agricultural goods
remains an issue, particularly in the developing world. Despite steady
progress in bringing down tariffs over the last 15 years, they are
still on average 2-3 times higher in developing countries than in
industrialized countries. Liberalization in developing countries can
also be an important lever for additional growth in South-South trade.
There are also substantial benefits to
be attained by increased competition and/or better regulation in all
modes of service delivery. The pursuit of these gains should not be
postponed. The multilateral process can help advance domestic reforms
and constrain protectionist interests.
We also recognize the importance of special and
differential treatment (S&DT) for developing countries. But S&DT should not
be confused with an invitation to free-ride the multilateral trade system.
After all one of the main benefits of engaging in multilateral trade
negotiations is the opportunity of using the process to leverage domestic
Another area that requires special attention concerns the impact of the
proliferation of preferential trading arrangements for the multilateral
trading system. As we argue in our upcoming Global Economic Prospects
publication (to be released on November 16th), two main goals should be kept
in mind when embarking on preferential deals: to make sure that these
agreements work in an effective manner (avoiding waste of resources) and
that they have minimal exclusionary effects.
Finally, we know that the trade agenda goes beyond border protection and
subsidies. Higher standards demanded by consumers in the North must not lock
developing country exporters into a cycle of poverty. And the quality of the
infrastructure in the South should be addressed so that supply-side
constraints do not continue to hinder the potential gains from trade. These
considerations, in turn, underscore the possibilities for trade and aid to
play a fruitful complementary role.
The Role of the World Bank
We have been working closely with the WTO, the IMF and other agencies in the
trade and development communities to ensure that our efforts with respect to
policy advice, technical assistance and information exchange are consistent.
And I hope that our request for observer status in the Trade Negotiations
Committee and its subsidiary bodies can be addressed shortly so that we can
make our cooperation even more effective.
An important cooperative effort between our institutions, as you all know,
is the Integrated Framework (IF) for Trade Related Technical Assistance to
the least-developed countries (LDCs). IF activities have been launched in
more than 20 countries in the past two years in cooperation with the WTO and
other IF agencies (IMF, UNCTAD, UNDP, ITC). Following the completion of
Trade Diagnostic Studies (DTIS), the IF has moved from diagnostics to
implementation. We know that implementation remains a challenge, but that is
an area where the pay-off from greater cooperation among agencies, donors
and national governments can be substantial. The integration of
trade-related actions into Poverty Reduction Strategies remains the best
route to promote greater coherence in this area.
With respect to standards, in addition to our own operational work, we
participate in the Standards and Trade Development Facility (STDF) that is
managed by the WTO. The STDF operates both as a grant facility – and we have
contributed to its funding – and as a coordinating mechanism in the area of
sanitary and phytosanitary standards. We hope that the STDF will promote
more strategic actions enhancing the sustainability of SPS measures in
Trade facilitation was one of the pillars of our announcement at Cancun with
respect to our support to the Doha Development Agenda. In FY04, our Board
approved 16 new projects with trade facilitation components for total
commitments (assigned) for this area of more than US$560 million. This more
than doubles the number of projects and commitments in FY03. Moreover, we
foresee that this high level of engagement will continue in the years ahead
(we expect Bank operations in trade facilitation to extend to more than 50
countries by FY06). In short, this is an area where we are already making a
difference and we stand ready to further cooperate with you all in
implementing this critical work program.
Another area where institutional cooperation is crucial concerns exchange of
data and information on trade barriers. Non-transparent forms of protection
– e.g., quotas, specific duties — make it difficult for developing
countries to anticipate the impact of liberalization. Software developed at
the Bank, and datasets developed by the ITC, UNCTAD and the WTO give us a
much better ability to analyze the consequences of the detailed proposals
being considered in the Doha Round. We need to further cooperate in
mobilizing funds to improve data quality and to make more and better
trade-related data publicly available.
With respect to the financing needs of the adjustment costs associated with
multilateral liberalization and preference erosion, I want to reaffirm that
we stand ready to discuss adjustment programs on a case-by-case basis. We
welcome the opportunity of consultations with the WTO’s Director General
with a view to explore alternatives to support the development of
cotton-dependent economies. We have consistently underscored the unfairness
of cotton subsidies that distort patterns of production and international
trade. There are a series of IDA-credits currently supporting the
reorganization of the cotton sector in Sub-Saharan Africa. And we have
indicated to the countries affected that the eventual allocation of
additional resources should be discussed in the context of their PRSPs.
Let me conclude by once again thanking you all for the opportunity to
discuss the important theme of coherence in the context of the multilateral
trade system. The World Bank will continue to participate in this dialogue
not only as an interested observer in the trade negotiations, but also as a
partner in our combined efforts to promote trade for development.