

Trade: World Bank militates in favour of poor countries

Nairobi, Kenya (PANA) - Removing barriers to trade could improve the grim situation of poor countries whose conditions have worsened following the 11 September attacks in the US, the World Bank said in a report released Wednesday in Washington DC.

The Report entitled 'Global Economic Prospects and the Developing Countries 2002: Making Trade Work for the World's Poor,' paints a grim short-term outlook for poor nations because of the downturn in the US, Europe and Japan.

Growth in developing countries is expected to fall to 2.9 percent in 2001, nearly half the 5.5 percent recorded in 2000, the report says, pointing out that Latin America, East Asia, and Sub-Saharan Africa are particularly hard hit this year.

"Reshaping the world's trade system and reducing barriers to trade could accelerate medium-term growth and reduce poverty around the world," it says.

The vexed issue of trade barriers imposed by rich countries against agricultural commodities and textiles from developing countries is a key item on the agenda of the World Trade Organisation (WTO) billed for November in Doha, Qatar.

Some African countries have threatened to boycott the meeting on grounds that rules set by global trade ombudsman were inimical to their economic progress.

Some critics say recent conciliatory notes coming from wealthy countries and the multilateral institutions they control could well be aimed at diverting attention from their genuine concerns.

But the Bank's report insists that expanding trade could well increase annual GDP growth by an additional 0.5 percent over the long run and, by 2015, lift 300 million people out of poverty in addition to the 600 million escaping desperate poverty with normal growth.

"Developing countries stand to gain an estimated 1.5 trillion dollars of additional income in the 10 years after liberalisation policies are begun," the report says, adding "developed countries would see their incomes rise by some 1.3 trillion."

However, "to make this happen, the developed countries have to be willing to put agriculture and textiles on the negotiating table because those are the products that the world's poor produce," says Uri Dadush, Director of the World Bank's Economic Policy and Prospects Group.

"A round that brings down barriers in agriculture, advances the timetable on textiles, and agrees to curtail anti-dumping at the same time it takes up the concerns of the industrialised countries has the potential for being a true Development Round," Dadush added.

Noting that trade matters more in today's integrated world than ever before, the report says performance in 2002 could be threatened by lower growth in the volume of world trade if consumers and businesses in industrial countries do not respond to lower interest rates or net fiscal spending, or if unpredictable events associated with the terror attacks prove disruptive.

"The terrorist attacks put a huge drag on the already sputtering engines of the global economy," notes Richard Newfarmer, principal author of the report, adding "what makes this situation unusually risky is that this is the first time since 1982 that the US, Europe, and Japan have all turned down at the same time."

As a result, growth in trade in 2001 has undergone one of the severest decelerations in modern times - from 13 percent in 2000 to perhaps 1 percent in 2001, the report says.

According to the report, developing countries are confronting a 10-percentage point drop in the growth of demand for their exports, seriously undermining their growth this year.

The report proposes a four-part policy agenda to "reshape global trade architecture to promote development." This includes launching a Development Round in the WTO, promoting global cooperation to expand trade outside the WTO, encouraging new policies in high income countries to provide assistance that will expand trade, and advocating for trade reforms within developing countries to accelerate development.

Citing the cost of subsidies to agriculture imposed by rich nations, which amount to an estimated 1 billion US dollars a day, or more than six times all development assistance to poor nations, the authors list numerous barriers that adversely affect developing countries.

These include subsidies, high tariffs on selected products of developing countries, and tariff codes of high-income countries that discourage forward processing in developing countries.

They call for high-income countries to grant duty-free, quota- free access to their markets for the low-income developing countries.

Dadush further notes that "if the US, Canada and Japan were to follow the lead of the European Union in its "Everything But Arms" preferential access scheme for the least developed countries, and if the programme were enlarged to all low-income developing countries, they could benefit more from globalisation."

Nairobi - 31/10/2001