People's Republic of China Hong Kong Special Administrative Region and the IMF
The IMF's Trade Integration Mechanism (TIM) -- A Factsheet
The IMF and the World Trade Organization -- A Factsheet
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WTO Ministerial Meeting, Hong Kong|
Address to the Plenary Session
by Anne O. Krueger
First Deputy Managing Director, IMF
December 14, 2005
Thank you Madame Chairman. I am pleased to have this opportunity to address the plenary session on behalf of the International Monetary Fund. As we all know, the Doha Development round has reached a critical stage, and I welcome the chance to re-iterate the Fund's strong support both for trade liberalization and for the efforts of all those involved in these negotiations as they seek to reach an ambitious agreement.
The stakes are high. A successful outcome to the negotiations will preserve and strengthen the world trading system; and, as a consequence, it will give impetus to accelerated global economic growth. More rapid global growth benefits all, but especially new entrants in world markets. Many low income countries have yet to experience the full benefits of their own trade liberalization. These benefits are greater (and adjustment costs less) when undertaken against the backdrop of a healthy world economy. A successful Doha Round will consolidate the progress made over the past sixty years—and avoid the damage that would be inflicted on the world economy by a slide back towards protectionism.
The history of the past six decades is clear: global economic growth and prosperity are inextricably linked with the expansion of world trade. Over that period the world economy has grown at a pace without historical parallel. Most countries have achieved rising living standards and poverty reduction on a scale that could hardly have been imagined.
And the multilateral economic framework established at Bretton Woods in 1944 is what made this global expansion possible. The progressive liberalization of world trade, overseen first by GATT and then the WTO, fuelled the rapid expansion of trade that, in turn, made possible rapid economic growth. The IMF, for its part, is charged with maintaining international financial stability and so promoting the expansion of trade. We have consistently worked to support the work of GATT and the WTO in liberalizing and strengthening the world trading system; and we continue to regard our work in this area as central.
It is easy to forget, in the detail of the negotiations, just how much all countries stand to gain from an agreement simply because a successful outcome will ensure the continued expansion of trade and so underpin future global growth.
Experience has repeatedly shown that the more open to trade economies are, the more rapidly they grow. No country has achieved sustained rapid growth without opening up. Of course, multilateral trade liberalization brings the greatest benefits. But let us also remember that unilateral trade liberalization brings significant rewards: and most of the gains accrue to the country undertaking liberalization.
This is the Doha Development round, Madame Chairman, and the focus is, rightly, on helping the world's poorer countries experience the full benefits of more open trade. Above all, that means recognizing the benefits to be had from trade liberalization by those countries. Developing economies will gain most from further trade liberalization, in large part because the remaining trade barriers are highest. When other countries are also liberalizing, those potential benefits are even greater, as all recognizer.
The international community has an important role in helping developing countries reap the full benefits of liberalization. There is scope to help strengthen trade capacity in poor countries. The Fund has been working in this area for many years both through the provision of policy advice during bilateral sessions with member countries and through the provision of technical assistance, helping members in a variety of ways, such as streamlining customs procedures and rebalancing administrative tax systems.
The international community can also provide reassurance to poor countries concerned about potential short-term adjustment costs, and here, too, the Fund has an important role.
Two years ago, in Cancun, I announced the creation of the Trade Integration Mechanism, or TIM, which was introduced formally last year. The TIM offers financial support for countries facing temporary adjustment shocks from liberalization by other countries. More recently, we have introduced so-called "floating tranches" under Fund-supported programs: these become available when a government undertakes reforms that might lead to a temporary worsening of the balance of payments.
And just two weeks ago, the Fund's Executive Board approved a new Exogenous Shocks Facility. This is available on concessional terms to low-income countries faced with shocks that cause a sudden and sharp deterioration in their external balance—and where the underlying macroeconomic framework is sound.
And when Fund financial assistance is not appropriate, for whatever reason, we support countries seeking financial help from other sources.
The Fund is also a participant in the Integrated Framework. This is a potentially useful vehicle to help establish priorities for providing trade related assistance and we welcome the work under way to enhance the Framework.
Madame Chairman, the draft Ministerial Declaration envisages continued Fund involvement in the provision of Aid for Trade. The Director General will consult with us, and with other parties, on ways to provide increased financial resources for developing countries. We regard our work in this area as vital: anything we can do to help poor countries achieve the gains from liberalizing trade is worthwhile and we encourage donor countries to play their part in this work as well.
I need, however, to address one specific question regarding the draft Ministerial Declaration. In Annex F there is a reference to Fund conditionality: that it should not interfere with the rights of WTO members. The Fund's conditionality is designed in consultation with members to help achieve balance of payments stability. Indeed, the Fund works actively to encourage members to be full participants in the world trading system and seeks to assist members in this. Fund conditionality should not be subject to WTO constraints and is consistent with members' WTO obligations.
But let me conclude by returning to the point I made at the outset. There are gains to be had by all in an open international economy. There are enormous and lasting gains to be had from further trade liberalization. And liberalizing countries will gain more in the context of multilateral opening and the faster growth that will accompany it. The Fund stands ready to support this process in whatever way it can.
IMF EXTERNAL RELATIONS DEPARTMENT