WTO news: what’s been happening in the WTO

20 March 2002

WTO Director-General Mike Moore calls for increased trade liberalization to help finance development

Trade liberalization can make a huge contribution to the generation of resources for the financing of development, World Trade Organization Director-General Mike Moore told the UN International Conference on Financing for Development in Monterrey, Mexico today ( March 21). But Mr Moore, while stressing the need for increased capacity-building to help developing countries participate more fully in the global economy, also noted that these nations will have to do more to reduce costly trade restrictions against each other.

“I come to you with a clear and simple message: Poverty in all its forms is the greatest single threat to peace, democracy, human rights and the environment. It is a time-bomb against the heart of liberty; but it can be conquered and we have the tools in our hands to do so, if only we have the courage and focus to make proper use of them,” Mr Moore told the world's biggest-annual development conference, attended by more than 50 heads of state, as well as ministers, heads of international agencies and finance and trade experts.

Mr Moore told delegates that developing countries would gain more than 15 times the estimated US$10 billion needed to achieve the core Millennium Development Goal of universal primary education, if trade was further liberalized. Abolishing all trade barriers could boost global income by US$2.8 trillion and lift 320 million people out of poverty by 2015, he said, citing World Bank estimates.

“Poor countries need to grow their way out of poverty and trade can serve as a key engine of that growth,” he said.

But developing countries need not wait until the conclusion of the Doha Development Round, he added. South/south trade in the 1990s grew further than world trade and now accounts for more than one-third of developing country exports, or about $650 billion. The World Bank reports that 70% of the burden on developing countries' manufactured exports result from trade barriers of other developing countries. “The quicker those walls come down, the quicker the returns to developing countries,” he said.

In terms of the developed nations, Mr Moore warned against market restrictions in four key areas. These were:

  • Agriculture, which he described as the backbone of almost all developing economies. Agricultural support payments now cost a billion dollars a day, noting that the average OECD bound tariff rate for agricultural products was four times that on industrial products. The return to developing countries in this one area would be eight times all the debt relief granted developing countries thus far, he added. Complete liberalization in all sectors, agriculture, manufactures and services, would amount to about eight times all ODA.
  • Textiles and clothing, which he called the greatest export earner for many developing countries. Mr Moore said we must ensure that the sector is cleanly integrated as planned for 1 Jan 2005.
  • On Tariffs, Mr Moore said that even more insidious than tariff peaks — which continue to attract high tariffs in both developed and developing countries — is the problem of tariff escalation, which tilts the tables against the development of indigenous processing. If developing countries are ever to diversify their economies away from the dependence on a few primary products, this escalation must be rooted out, he said.

Noting that restrictions were costly to the countries maintaining them, Mr Moore told the conference that protection costs the European Union, the US and Japan, from between US$70 to US$110 billion each annually. “The net losses to the US associated with its textile and clothing import restrictions alone amount to over $10 billion annually,” he said.

“This conference is about financing development in an era when private foreign direct investment outnumbers ODA four-fold, and is 10 times the World Bank's development lending. That's why many want an investment agreement in the Doha Development Round”.

Mr Moore also emphasized the importance of other important development and good governance issues, such as transparency in government procurement, competition policy and trade facilitation. “Trade facilitation reform will generate huge returns,” he said, citing an Inter-American Development Bank study of two South American countries, in which a truck delivering product to markets across two borders took 200 hours, 100 hours of which were bound up in bureaucratic delays at the border.

“This domestic red-tape and bad governance is costly and corrosive,” said Mr Moore, who also observed that the poor's assets need to be legitimised. He noted that in Latin America, 80% of all real estate is held outside the law.

“The extra-legal sectors in developing countries account for 50% – 70% of all working people. In the poorest nation in Latin America, the assets of the poor are more than 150 times greater than all foreign investment since their independence in 1804. In one African country, it took 77 bureaucratic procedures at 31 public and private agencies to legally acquire land. He added that if the US were to raise its ODA to the UN target of 0.7%, it would take the richest country on the planet 150 years to transfer to the world's poor, resources equal to those they already possess”.

Citing recent WTO commitments to increased capacity-building, Mr Moore concluded: “We should provide technical assistance to train negotiators, build efficient customs regimes and plug porous tax systems. We must give as much attention to building up the intellectual infrastructures of skilled public servants as we did to filling in potholes, building roads and dams. The Doha Development Round, can be achieved and implemented on time. The condition for success will be improving capacity to provide for good governance, to enable them to participate, negotiate, conclude and implement our agenda. This is being done. We can and we must succeed”.

> Full text of the speech: UN Financing for Development Conference summit-level opening session