## Doha Development Agenda and Aid for Trade—Supplement

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### Background and context
- Prepared by the Policy Development and Review Department; Approved by Mark Allen; November 1, 2005.
- Mandate: follow up on Development Committee and IMFC request (2005 Spring meetings) to develop detailed proposals to help developing countries adjust to and take advantage of the Doha Round.
- Joint Bank-Fund paper circulated to the Fund Executive Board on August 19, 2005; discussed by World Bank Executive Board on September 6, 2005; presented to the Development Committee on September 25, 2005.
- September 2005 IMFC Communiqué welcomed the joint staff proposals and urged the Fund Executive Board to consider them expeditiously.

### Key proposals (summary)
- Enhance the Integrated Framework (IF), including predictable, multi-year financing on the order of $200–400 million over an initial five-year period.
- Examine adequacy of existing mechanisms to address regional or cross-country aid for trade and explore new financial mechanisms as appropriate.
- Make a firm Fund and Bank commitment to assist countries facing adjustment needs through analysis, advice and—as necessary—financial support.

### Rationale against a new multilateral trade-adjustment fund
- The paper argues against creating a new dedicated multilateral fund for trade adjustment support because:
  - Support must be viewed within an overall macroeconomic framework for each beneficiary country.
  - A new fund’s governance and administrative structure would replicate existing capabilities.
- Does not preclude bilateral grant initiatives to address adjustment costs (e.g., preference erosion).

### Integrated Framework Steering Committee (IFSC) and next steps
- IFSC agreed to form a task force of donors and developing country representatives to design an enhanced IF operational and governance structure.
- Consensus that an enhanced IF should be based on three elements:
  - Additional and predictable financial resources;
  - Strengthened capacity in IF beneficiary countries;
  - Improved IF governance.
- Task force deliverables and timeline:
  - Prepare an outline prior to the 6th Ministerial Meeting of the WTO in Hong Kong (December 13–18).
  - Submit a full report by April 2006.
- Consultation requirement: task force to consult IF donors, developing country representatives and IF agencies (including the Bank and the Fund).
- Fund staff involvement contingent on outcome of Executive Board consideration of the Aid for Trade paper.

### Fund response framework to adjustment costs (paragraph 62 reference)
- Three-level response envisaged:
  - Analysis and surveillance:
    - Key developing-country concerns to be examined: (1) fiscal impact of tariff reductions, (2) impact of preference erosion in major export markets, (3) possible changes in food terms of trade, (4) demands of financial services trade liberalization on regulatory and supervisory frameworks.
    - Analyses to inform Fund surveillance and to be conducted only for countries with a prima facie case of significant adjustment shocks.
    - Ongoing work: joint FAD/PDR working group examining revenue impact of Doha tariff reduction scenarios; RES finalizing a paper on possible preference erosion.
  - Technical assistance:
    - Continued assistance for redesign of tax systems in the face of tariff revenue loss; potential for further targeting of FAD technical assistance based on analytical work.
    - Fund experience in customs reform to support implementation of any Doha Round agreement.
    - Technical assistance in financial systems regulation and supervision to meet requirements of more open trade in financial services.
  - Financial support:
    - Financial needs from trade reform adjustment can generally be met through Fund arrangements under the GRA or PRGF.
    - Trade Integration Mechanism (TIM) provides added assurances to help members cope with possible balance of payments impact of partner liberalization.
    - Fund missions have begun discussing incorporation of floating tranches under Fund arrangements to provide flexibility on timing of trade reforms associated with potential transitory balance of payments shortfalls.
    - Where Fund mechanisms are inadequate, missions would assist members in making a case for support from other sources.

### Resource implications and departmental considerations
- Proposals are consistent with existing Board guidance on the Fund’s work on trade.
- Potential need for additional resources for technical assistance, particularly in FAD:
  - Increased demand for FAD TA activities could exceed existing resources; matter remains under review.
- Other departments: proposals not expected to result in a net increase in demand for staff resources, though events may require a temporary shift in emphasis toward trade-related vulnerabilities.
- Existing policies mandate increased attention to trade issues when serious trade distortions hamper macroeconomic prospects or when balance of payments or fiscal accounts are vulnerable to trade developments.

### Issues for Executive Board discussion
- Do Directors agree with the recommendations summarized in paragraph 62 of the Bank-Fund paper on “Doha Development Agenda and Aid for Trade”?
- Do Directors agree that an enhanced and suitably redesigned Integrated Framework could play an effective role in helping to identify aid for trade needs and coordinating assistance?
- Do Directors concur that the Fund should assist countries concerned about the possible macroeconomic and financial implications of a Doha Round agreement with analysis, technical assistance and, as appropriate, financial support?

*International Monetary Fund — Doha Development Agenda and Aid for Trade—Supplement (November 1, 2005)*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/np/pp/eng/2005/_110105d.pdf_