> Communiqués de presse
> Allocutions: Supachai Panitchpakdi
liminaires et finales du Directeur général et du Président du Conseil
du Directeur général
Members of the Council, and Dr Supachai.
I’m delighted to be here this morning. I greatly appreciate the
invitation to attend this meeting and the opportunity it provides for
me to discuss with you some of the ways in which the International
Monetary Fund is seeking to support the Doha process.
My presence here today, and your original invitation, underlines the
closeness of our two institutions. The Co-operation Agreement signed
in 1996 has, I believe, been a great success. We have different
responsibilities, of course, but a shared objective—the expansion of
world trade and the rapid growth and rising living standards that this
will bring. The more we can work together, the better the chance of
realizing our goal.
As Ambassadors to the WTO, you are all much closer to the negotiations
currently under way; and consequently better informed than I am. But I
think that I have managed to come to Geneva at a propitious moment.
There are clear signs of renewed commitment to a successful Doha round
outcome: and that commitment is essential for a deal to be struck.
Of course, there are many hurdles still to be overcome. But in his
remarks to the meeting of the International Monetary and Financial
Committee in Washington last month, Dr Supachai spoke of the intensive
consultations under way; and of the constructive and determined manner
in which those consultations were taking place. Reports of
developments since then have continued to be positive, and there is a
real prospect of completing the framework agreements by the summer.
On behalf of the Fund, let me urge all of you to continue the work in
this constructive spirit. But lest you think I am here simply as a
cheerleader, let me also spell out why we in the Fund think a Doha
deal is so important; and where we think we might be able to play a
modest role in assisting the process.
The benefits of free trade
This is hardly the place for me to rehearse
the benefits to be had from free trade. After all, you are,
collectively, the embodiment of the multilateral trading system that
has served us so well for nearly sixty years. The rapid growth of
world trade in those decades was accompanied by rapid sustained
economic growth, rising living standards and poverty reduction. Never
before have so many people escaped from poverty. And driving that
rapid growth in trade was the process of multilateral trade
Launching the Doha round was intended to maintain the momentum
established by previous trade rounds and to press on with the lowering
of tariff and non-tariff barriers to trade. And the ambitious Doha
program went further than previous negotiating rounds in the
commitment made to developing countries—indeed, we refer to it as the
Doha Development Agenda.
To succeed, Doha needs the support of all WTO members. It deserves
this support. A successful Doha round would provide the foundation for
rapid and sustainable growth around the world, bringing rising living
standards and reducing poverty.
Trade liberalization should be embraced enthusiastically. No country
has achieved rapid and sustained growth over a long period—with all
the benefits that brings—without trade liberalization. Doha offers the
opportunity to free many more people from poverty: indeed, it is vital
if we are to have any chance of meeting the Millennium Development
Goals. It is a win-win situation for all countries—although, as I
shall discuss in a moment, there can be some short-term adjustment
costs for some.
But, as the communiqué of last month’s IMFC meeting pointed out,
successful completion of the Doha round is a shared responsibility.
The developed countries have obligations, especially with respect to
market access and to the reduction of trade-distorting subsidies. But
developing countries must play their part, too. The developing world
has by far the most to gain from a Doha agreement. The World Bank
estimates that around two thirds of the gains would accrue to
But it is important to remember that most of these gains will come
from trade liberalization by and among the developing countries. Trade
barriers between developing countries are significantly higher than
those imposed by developed countries.
The role of the Fund
I noted earlier that the Fund’s role in the
promotion of global trade is different from that of the WTO. But we do
have an important role. It is a responsibility we take very seriously.
Trade cuts across many aspects of our work. We firmly believe that
trade liberalization can be most effective, and bring the greatest
benefits, when carried out in a multilateral framework. But even
unilateral trade liberalization brings benefits for the country that
undertakes such liberalization.
Our surveillance work provides us with a good opportunity to encourage
our member countries to adopt trade policies that are in their best
interests. We conduct what we call Article IV consultations every year
with most of our members, marginally less frequently for the remainder.
Trade liberalization is often an important part of these consultations
because it can help achieve the objectives which all our members share—macroeconomic
stability, sustainable growth and rising living standards.
When needed, we can also provide technical assistance to those
countries that need practical help in creating the right economic
framework to encourage growth through trade. We can, for instance,
advise on how to replace revenue from import tariffs with revenue from
less distorting tax regimes. We now have several regional technical
assistances centers, able to provide or marshal more focused advice.
And we can, where appropriate, provide financial assistance through
The need for a new initiative
But can we do more? In the past year or so
we have been reflecting on this as we became more keenly aware that
there was antipathy in some developing country members to the
potential costs to them of a Doha round settlement.. In some countries
there is concern about the economic impact of preference erosion; or
of changes in the terms of food trade resulting from liberalization in
export markets and reforms of the subsidy regimes of other countries.
In other countries, there is concern about the elimination of quotas
on textiles and clothing. Although agreed under the Uruguay Round,
this will only come into full effect at the end of this year.
I suppose the doctrinaire response to such concerns is to dismiss them,
and to reiterate that free trade is beneficial and desirable.
But that would be wrong. It would also ignore the Fund’s traditional
practice. We always take the concerns of all our members seriously. If
we judge those concerns to be misplaced, it is our duty to explain why—to
the satisfaction of our members.
Based on experience with previous trade rounds—and we are going back
fifty years or so—there is no question that the overall impact of an
ambitious Doha agreement would be positive—and large, for the global
economy as a whole and, over the longer term, for virtually all
countries. This conclusion is supported by our own research, and that
But some of the concerns expressed by individual countries are
understandable, and we have been studying ways to address these. A
minority of WTO members might need some assistance initially as they
adjust to a more liberal multilateral trading system. They might, for
instance, have to cope immediately with the elimination of preferences
that affects them disproportionately; and there could be delays before
the benefits that flow from a more liberal trading environment start
to be realized.
In keeping with our mandate, we have focused on the possible balance
of payments implications of further multilateral liberalization. We
have examined the possible impact of preference erosion and we expect
this to be overwhelmingly concentrated in a small number of products—above
all, sugar, bananas and textile products. If we assume an ambitious
Doha outcome, we reckon that no more than two dozen countries would
experience a decline in export values of 2% or more from preference
erosion. In most instances, at least some part of this decline would
be offset by increased exports resulting from improved market access
for other exports.
It is harder to predict the impact of agricultural subsidy reform on
changes in the food terms of trade. But the experience of the Uruguay
Round suggests this is not likely to be very large. The consequences
of a more competitive environment for textiles exports are even more
difficult to judge: but a range of estimates suggest that the impact
could be significant for a small number of countries.
But let me be clear. For the vast majority of countries, the benefits
of a Doha agreement would be, as they would be for the global economy
as a whole, overwhelmingly positive even in the short term. In the
great majority of cases, we would expect any balance of payments
shortfalls to be small and temporary. Just to take one example: a
decline in export income from certain products that currently enjoy
preferential market access would not necessarily mean an equivalent
impact on the balance of payments: other exports will benefit from the
more liberal trading environment.
And even for those members who might be adversely affected in the
early stages of implementation of a Doha agreement, the impact is
unlikely to last long. In most cases, the phasing-in of Doha
liberalization would take place over several years and so allow time
for smooth adjustment. And it is important to remember that all
countries will gain from the expansion of trade and the consequent
impact on global economic growth.
Countries that are in need of temporary assistance would still, of
course, have access to all the usual forms of assistance the Fund
provides as a matter of course. But we recognize that this, along with
the assurances I have spelled out, might not be enough to provide
reassurance for governments where there is concern about the economic
adjustment needed to benefit from a more liberal world trading system.
The Trade Integration Mechanism
It is to address those concerns that we have
developed the Trade Integration Mechanism, or TIM. I first announced
this initiative at the Ministerial meeting in Cancun last September.
Since then we have been working to flesh out the proposal. I am
pleased to say that the mechanism was formally approved by the
Executive Board a few weeks ago. I’d like briefly to spell out how it
Countries expecting short-term balance of payments difficulties in
coping with the effects of a liberalization in third country markets—either
under a Doha agreement or other non-discriminatory liberalization that
has similar effects—will be able to request assistance under the TIM
They can do this within the context of an existing Fund-supported
program (such as under a standby arrangement, or a program under the
Poverty Reduction and Growth Facility) if they already have one. Or
they could seek financing under a new Fund arrangement.
Once a request has been received, the next step would be for our staff
to make an assessment of the likely size and timing of any adverse
economic impact. This “baseline” figure would be used to calculate how
much financial assistance might be needed; or, if a country already
has a Fund-supported program, how much extra assistance should be
The baseline is important, because if it transpires that the impact is
greater than anticipated by this reference figure, the mechanism can
provide a country with rapid topping-up, of up to 10% of its Fund
quota, without waiting for the regular program review and following
simplified assessment procedures. Any larger unanticipated financing
need could be considered under a regular review.
Of course, this topping-up provision would relate specifically to the
issue of trade liberalization and not to some more general need
reflecting, for instance, problems in implementing the Fund-supported
Let me say a word about conditionality. This would not necessarily be
different under the TIM than under an arrangement that had no TIM
element. But where assistance was provided through the TIM we would be
looking to encourage countries to adopt the policies needed to enable
the economy to adjust as rapidly as possible to the new, more liberal,
global trading system. Any agreed topping-up under the TIM would not
normally involve additional conditions.
Those countries who might want, and be eligible for, assistance under
the terms of the new mechanism will—of course—be interested in the
terms on which such help will be available. Where a program already
exists, the additional help would carry the same terms. Where a new
Fund-supported program is needed, the terms would be those of the
framework under which TIM assistance is provided. So, for example, TIM
support provided to low income countries through a PRGF facility would
usually incorporate a considerable subsidy element.
One important factor to bear in mind, though, is the impact of new
assistance on a country’s external debt burden. In countries with a
precarious debt situation, any non-grant assistance, including under
the TIM, would clearly need to be carefully evaluated.
We confidently expect any balance of payments impact to be temporary,
while the positive changes in the trading environment will, of course,
be lasting. It will be important to structure the help provided under
the TIM in such a way that it does not slow the process of adjustment.
Anything that delayed the time at which a country was able fully to
exploit the undoubted benefits of trade liberalization would be
counter-productive. TIM’s purpose is to make the transition easier—not
to put it off. Ultimately, it is sustainable growth that will bring
poverty reduction, and trade liberalization is an important element in
driving that growth.
The TIM’s purpose is clear. It is to ensure
that the Fund is properly attuned to any need to ease adjustment that
might arise during the initial period when a Doha agreement is being
implemented. A clear focus on potential problems is important for two
reasons: first it should provide reassurance to those governments
apprehensive about how a Doha settlement might affect their economies
in the short-term; and second, to ensure that the Fund is geared to
rapid action both in anticipating needs and in reacting if those needs
turn out to be greater than initially thought. It is, if you like, a
way of exploiting the Fund’s financial resources in a more targeted
way in order to deal specifically with what will be a rapidly changing—and
I should emphasize a rapidly improving—global trade environment.
When we first started to develop this mechanism, we viewed it rather
like an insurance policy. The clear evidence is that only a very small
number of countries will ever need the assistance that the TIM offers.
But if its existence helps provide governments and policymakers with
the reassurance they need, it should make it easier for them to
embrace the Doha Development Agenda, knowing that they will be able to
exploit the opportunities an agreement will provide, while worrying
less about the potential downside risks, however small these are.
Of course, some work remains to be done on the mechanism. In
particular, more work will be needed to ensure that the initial
assessment calculations can be done accurately and speedily. Much of
the expertise for some of this detailed work lies outside the Fund—indeed
much of it is here at the WTO, as well as at UNCTAD and the ITC. It
makes sense for our institutions to work closely together as we begin
to implement the mechanism, and I have asked Fund staff to push ahead
as speedily as possible with their counterparts here and elsewhere.
The encouraging developments of the past few
weeks have given new impetus to the Doha negotiations. We in the Fund
are following events closely. As I said at the outset, we
enthusiastically support the goals of the WTO, the progressive
liberalization of world trade. We were charged with promoting trade in
our original articles of agreement, first set out sixty years ago.
Ours is not the central role, but we are determined to do what we can
to encourage the process and, through the TIM, remove potential
obstacles to a successful outcome.
Ultimately, the fate of the round depends on you. I wish you all