More WTO-World Bank-IMF cooperation on trade

2 November 2001

The draft Ministerial Declaration for the World Trade Organisation’s Doha Meeting in November calls for the WTO to cooperate more closely with the World Bank and IMF. Noting that the “challenges” faced by WTO members in the global economy can no longer be addressed through a trade-only regime, the document states that the WTO “shall continue to work with the Bretton Woods institutions for greater coherence in global economic policy making”.

Greater coherence in this area, say WTO campaigners, means the continued dominance of developing economies by powerful northern governments. Given the power structures of the World Bank and the IMF and the leverage these institutions have on the economies of southern nations it is undesirable to have them joining forces with the WTO “to influence and change trade policies of developing countries”, according to Chakravati Raghavan, editor of Third World Economics. “The need to mainstream development concerns in the WTO, and to make development take centre stage in WTO … is altogether missing,” comments Martin Khor, Director of Third World Network (TWN).

The World Bank’s “expertise” in development issues has been cited as one of the primary reasons for the convergence. For some years the Bank has been publishing studies and providing “capacity building” to enable developing countries to prepare for multilateral trade agreements. This is reinforced by structural adjustment programmes, which support the liberalisation of trade and foreign exchange policies in developing countries.

Given the imbalances in the WTO decision-making processes and dispute settlement mechanisms, trade campaigners are understandably wary of any move towards greater coherence between the WTO and the World Bank and IMF.

The Draft Doha Declaration calls for the WTO General Council to examine measures “to strengthen the coherence of international trade, financial and monetary policies with a view to safeguarding the multilateral trading system from the effects of financial and monetary instability”. Convergence thus appears to mean the streamlining of World Bank and IMF policies on trade to reflect provisions in WTO agreements. For the IMF, this would involve ensuring that their policy advice is consistent with WTO measures. One of the key points in a joint 1998 report by the heads of the World Bank, IMF and WTO, is to ensure that countries do not “introduce additional trade protection on balance of payments grounds”.

In 1999 India’s restrictions on the import of agricultural, textile and industrial products were removed following a complaint by the USA. The WTO Dispute Settlement Panel, which examines such complaints, heard evidence from the Government of India arguing that it needed to maintain the restrictions to support its balance of payments position. This was countered by evidence given by the IMF, resulting in India being found to have contravened its obligations under the General Agreement on Tariffs and Trade 1994 and under the WTO Agreement on Agriculture.

The World Bank has recently reiterated its commitment to the trade framework established by the WTO, calling for the reduction in trade barriers in the upcoming summit as a means of buffering the economic aftershocks of the September 11 attacks on the US. “Now more than ever, the WTO summit must go ahead, motivated primarily by a desire to use trade as a tool for poverty reduction and development,” says the Bank’s September statement Poverty to Rise in Wake of Terrorist Attacks.

As a major source of development funding, the trade policies espoused by the Bank have a profound impact on developing country economies. The Bank and Fund may demand that countries sign up to WTO agreements as a condition of their financing. The World Bank and IMF are likely to intensify their work on the elimination of all tariff and non-tariff barriers to trade, the removal of restrictions on foreign investment and the strengthening of intellectual property regimes.

NGOs have previously cautioned against the World Bank’s unconditional endorsement of the WTO regime. Lisa Jordan of the Bank Information Centre analysed this in detail in a paper published just before the 1999 Seattle summit. She wrote that a convergence between the World Bank and the WTO might spell “the death of development”, as the current trade agreements are heavily weighted against developing countries and “misdiagnose development problems”.

“The new trade round proposals are an opportunity for civil society groups to get the message across about the new united folly of globalisation,” says Raj Patel of the Southern and Eastern African Trade Information and Negotiations Initiative.

Third World Network’s regular updates on the Doha meeting

Draft WTO Ministerial Declaration

Official meeting website

The Death of Development: The Converging Policy Agendas of the World Bank and the World Trade Organisation by Lisa Jordon, Bank Information Centre.

For IMFWBWTO Synthesis Report, email Rick Rowden

New Bank report sets out trade agenda