Bank trade hymn out of tune once again

26 July 2004

Pouring cold water on a progressive trade proposal from the EU, the Bank’s trade director has once again crossed the boundary from advocacy into ideology.

In mid-June, Uri Dadush, head of international trade at the Bank, responded to an EU proposal that the poorest countries only be required to cap their tariffs at existing levels rather than make substantial cuts. “The EU proposal, although well intentioned, is not appropriate for development”. Dadush argued that poor countries must offer new market openings or they would have no leverage in persuading rich countries to end their unfair subsidies to agriculture: “You’re not going to get, let’s face it, the same pressure on doing something about cotton, and doing something about sugar, if the countries that are interested in those reforms” are not offering something in return.

Roberto Bissio, coordinator of Social Watch, wrote to president Wolfensohn asking for some consistency in the Bank’s message on trade. At the Annual Meetings in 2002, Bissio was on a panel where Wolfensohn joked that he would “get rid of” anyone who worked on the assumption that unilateral trade liberalisation was good for developing countries. Bissio suggested that “it is about time your staff sings the same hymn you are singing. And that your monies dance at the same rhythm. Otherwise, your personal credibility and that of the World Bank will suffer.”

it is about time your staff sings the same hymn you are singing

Gobind Nankani, vice president of the poverty reduction and economic management group, replied to Bissio’s letter saying that, “unfortunately, there is no free lunch – and developing countries would pay a price … it would be paid in the form of the missed opportunities that governments could otherwise seize to undertake domestic reforms that will promote growth.”

Dadush and Nankani’s comments run counter to the analysis of a number of international agencies and trade analysts. The June UNCTAD conference in Sao Paulo unanimously concluded that countries should use the ability to explore options and maintain the necessary space for policy in order to arrive at the best possible balance between different approaches in their national development strategies.

This view of the role of trade in development is echoed in the latest study from the Commonwealth Secretariat, written by Joseph Stiglitz, former World Bank chief economist. The Stiglitz report calls on rich countries to open their markets without requiring poorer ones to liberalise. Stiglitz says many developing countries have been hurt by past trade agreements and have been forced by the IMF to take trade liberalisation measures that had damaged their economies.