The Progress Achieved so far in the Negotiations is Disappointing, A Commentary by Rodrigo de Rato, Managing Director, International Monetary Fund

December 11, 2005

A Commentary by Rodrigo de Rato
Managing Director, International Monetary Fund
Welt am Sonntag
December 11, 2005


Starting next Tuesday, top trade officials from around the globe will meet in Hong Kong for the World Trade Organization's (WTO) Sixth Ministerial Conference. Their task: set a course for the Doha multilateral trade negotiations that will bring these talks to an ambitious conclusion by end-2006. In this important endeavor they need and deserve our vocal support.

Progress so far has been disappointing, and putting the Doha Round back on track will not be easy. Economies at all levels of development stand to benefit. But defensive special interests have so far exerted disproportionate influence over the negotiations, delaying the needed decisions. Before the window of opportunity begins to close—as it will in the coming months—governments must face down those groups that would perpetuate high trade barriers. Further delay would slow progress toward the U.N. Millennium Development Goals, which aim to halve global poverty by 2015. Delays would also cast aside opportunities for economic growth for countries at all levels of development, and encumber the smooth resolution of global imbalances. A multilateral system of trade with universally recognized rules and mechanisms to resolve differences is to the benefit of all countries.

The logic of trade reform is simple, clear, and compelling. Further opening global markets for industrial products, agriculture, and services would provide benefits for all countries individually and for the global economy as a whole.

For the developing countries—especially the poorest countries—it would create an environment more conducive to exports that would enable them to grow faster and attract investment, and help to lift millions out of poverty. More open export markets would also provide additional encouragement to undertake the reforms that would allow developing countries to take the greatest advantage of new opportunities, including through greater trade among themselves. Indeed, strengthening the export potential of developing countries is an important part of the international community's strategy to relieve the effects of the heavy debt burden on the Third World.

Advanced and middle-income economies can also expect that opening global markets would boost their economic growth. Nearly all these countries distort their economies with policies that benefit narrow business interests but which also have the broader effect of burdening their populations with taxes or higher prices. This is certainly true of the agricultural policies of the OECD countries, which annually provide their farmers some $100 billion of subsidies while protecting their markets behind high tariff walls. It is also the case in the middle- income countries that protect favored manufacturing industries. And countries of all income levels are burdened by restrictions on trade in services. The potential gains from reforms targeting these obstacles to open trade could be on the order of hundreds of billions of dollars a year. First and foremost, reform benefits the country undertaking the reform. Experience shows that open economies grow more and more sustainably than closed economies.

Finally, there are benefits for the global economy as a whole. Market-opening reforms would enable the world economy to adjust more smoothly to global developments. Flexible product and service markets help economies adjust to commodity price shocks or the emergence of macroeconomic imbalances across different regions of the world. For example, Alan Greenspan, the Chairman of the U.S. Federal Reserve, has highlighted the importance of flexible markets in giving the American economy the chance to tackle its huge current account imbalance in an orderly manner. More open markets throughout the world would play a similar role for the global economy.

The IMF, the World Bank and others have recognized the legitimate concerns of some developing countries that ambitious trade liberalization could have adverse short-term effects. Other countries may also be prevented from fully exploiting the opportunities of an open world economy by the constraints of inadequate infrastructure and skills, or institutional weaknesses. These countries deserve the international community's assistance. We need convincing offers of financial and technical assistance: in short, more aid for trade. For its part, the IMF is prepared to help, through technical assistance, with policy advice, and, where appropriate, financing. Last year, the IMF introduced a Trade Integration Mechanism specifically to address concerns about the possible negative impact of multilateral trade reforms on countries' balance of payments.

Responsibility for ensuring success at Hong Kong rests with all countries. Because of the sheer size of their economies, the industrial countries must show leadership. But emerging market countries such as Brazil, China, and India are increasingly prominent in world trade, and opening their markets more could offer great promise to other developing countries and, particularly, the least-developed. Some years from now I hope we can look back at the Hong Kong meeting of the WTO as having laid the foundations for a major opening of North-South trade. Such a breakthrough would help to sustain the impressive growth performance of the advanced developing countries and to boost the export prospects of the less-developed countries.

Many nations, groups and ordinary citizens all over the world share our concern at the plight of the poor and share our desire for sustained economic growth and stability. Liberalizing trade and opening markets through the Doha Round would help greatly. Participants at Hong Kong face a difficult task. We should wish them success. But we should also be vocal in encouraging them toward the most ambitious possible outcome.


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