World Bank Urges Rich to 'Go First'

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Posted by Sadie from D007057.N1.Vanderbilt.Edu ( on Thursday, September 04, 2003 at 11:08AM :

September 4, 2003
Inter Press Service, via
World Bank Urges Rich to 'Go First' on Free Trade
by Emad Mekay

WASHINGTON - As delegates begin gathering in the Mexican sea resort of Cancun for talks aimed at liberalizing world trade, experts are warning the meeting will fail without substantial moves by rich nations, whose positions are largely now blamed for the chronically stalled negotiations.

”They are the dominant players and account for two-thirds of the global market,” said Nicolas Stern, chief economist of the World Bank, on Wednesday.

”They could show leadership by reducing agricultural protection, cutting high tariffs, and ensuring that the poorest countries have access to affordable medicines on the same terms as bigger developing countries,” he told reporters.

A leading business group also called on the U.S. administration to lead the way if it wants to see real development at next week's high profile meeting on free trade of the World Trade Organization (WTO).

The Washington-based Committee for Economic Development (CED) on Wednesday urged the Bush administration to adopt vital policy reforms.

They include de-linking agricultural subsidies from prices and production while opening agricultural markets everywhere, and eliminating all tariffs and non-tariff barriers in both manufacturing and services.

Also on Wednesday, the World Bank released its annual 'Global Economic Prospects' report with a fervent call on rich nations to work towards a trade deal that could spur global growth and reduce poverty in the world.

It was published prior to a crucial meeting of some 147 trade ministers in Cancun, Mexico, Sep. 10-14. The gathering is an interim assessment of global trade talks that are scheduled to end by Jan. 1, 2005.

But the WTO talks have been marked by sharp differences between rich and poor countries.

Those differences made a failure of the organization's meeting in December 1999, which ended without an agreement over rules for starting a new round of global trade talks.

WTO members eventually launched new talks in 2001 in Doha, Qatar, only a few months after the Sep. 11, 2001 terrorist attacks on U.S. landmarks.

Disputes revolve around rich nations and economic groupings like the United States, Japan and the European Union (EU) on the one hand and developing countries like Brazil and India on the other.

Among the sticky issues are agriculture trade, tariff reductions on manufactures and drug patents in poor countries.

But CED, the World Bank and other organizations now say the onus lies almost entirely on the United States and other rich nations to lead the way and stop practices that have crippled small farmers and businesses around the world.

''It is time for the United States to break the cycle of low expectations and provide real leadership on trade,” said James D. Robinson III, chairman of CED's subcommittee on expanding world trade.

''The United States can and must lead the way to progress on agricultural and other issues and guide the WTO towards fully open markets,'' he added at a press conference.

Robinson argues that trade talks have been plagued by limited expectations, so that even the smallest gains are often hailed as major victories, while the more significant goals of comprehensive free trade remain illusive.

By going first, Washington would show a clear commitment to the principles of open trade and would challenge its trading partners to respond in kind, he argues.

Lingering inequities in the world's trading system have, according to the World Bank, dragged down export growth in developing countries and prompted them, especially middle-income countries, to delay trade liberalization and view trade talks with suspicion.

The United States, for example, spends some 50 billion dollars annually on direct support to its agriculture sector alone. Annual cotton subsides to U.S. farmers stand at more than three billion dollars, or three times Washington spends on foreign aid to all of Africa.

This, too, depresses world cotton prices and ”crowd(s) out poor but efficient farmers in West Africa” and Brazil, says the Bank.

The international development group Oxfam says the same is happening to Mexican corn farmers.

The United States spends 10 billion of taxpayers' money each year subsidizing its corn farmers and, in turn, inflating production. Excess corn is then sold at prices below the cost of production -- or ''dumped'' -- on Mexican markets, causing corn prices to plummet.

”In the end, Mexico's 2.5 million corn farmers suffer dearly; in fact, corn prices in Mexico have dropped by 70 percent since 1994,” said Oxfam in a statement Wednesday. Corn is at the heart of Mexico's diet and culture.

The pattern is being repeated elsewhere.

Japan's support to its rice producers, for example, amounts to 700 percent of production cost. This, the World Bank says ”effectively shuts out exports from Thailand and other producers”.

And direct budget subsidies to producers in the EU cost some 100 billion dollars every year, which depresses world market prices in sugar, dairy, and wheat.

According to a report released Monday by Oxfam, rich countries are also guilty of applying higher tariffs on imports from poor nations than imports from other rich nations, a view that was echoed in the Bank's 'Global Economic Prospects'.

Industrialized countries on average charge each other tariffs of about one percent on their imported manufactures but collect as high as five percent from East Asia, six percent from the Middle East and eight percent from South Asia, says Oxfam.

Mongolia, for example, pays nearly the same dollar amount in tariffs to the U.S. government as Norway, although it sells only three percent of the value of goods that the Nordic nation sells in the United States.

”Can anyone argue this system is living up to its development potential for the poor?” asked Richard Newfarmer, economic adviser at the World Bank.

The bank says that progress in Cancun could restore investor confidence, and pave the way towards a comprehensive WTO deal that would in turn spur trade and eventually raise incomes around the world.

The Washington-based economic powerhouse estimates that if the rich nations lead in negotiating a fair outcome to the Cancun meeting, an eventual trade deal could produce up to 520 billion dollars in income gains to both rich and poor countries.

That would reduce the number of the world's poor by as many as 144 million people by 2015.

Copyright 2003 IPS - Inter Press Service

-- Sadie
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