WORLD TRADE
ORGANIZATIONWT/MIN(03)/ST/20
11 September 2003
(03-4752)
MINISTERIAL CONFERENCE
Fifth Session
Cancún, 10 - 14 September 2003Original:  English
INTERNATIONAL MONETARY FUND (IMF)
Statement by Mrs. Anne O Krueger
First Deputy Managing Director
(Speaking as an Observer)
I'm delighted to be here in Cancún and, on behalf of the International Monetary Fund, to
offer support for the negotiations over the coming days. A successful conclusion to the DohaRound is vital if we are to maintain the momentum established by earlier trade r ounds.  It would
provide a boost for the world economy as a whole.  The IMF is determined to do all it can to help
make the Round a success.  I hope today to explain how we at the Fund might make a practical
contribution to help ensure that success.
The benefits of free trade
The healthy expansion of international trade is at the heart of  the IMF's mission.  It has been
one of our core purposes since the Articles of Agreement were  first drafted nearly 60 years ago.  And
for good reason.  Trade is a driving force of ec onomic  growth in all countries.  It is not by chance that
the rapid growth of international trade since Worl d War II has coincided with an unprecedented pace of
global economic expansion.
Our advocacy of free trade is nor just rhetoric.  The accumulated evidence from the past
50 years demonstrates conclusively that the benefit of free trade are widespread.  No country has
achieved rapid and sustained economic growth without opening its economy to the rest  of the
world.  Those countries that have been most successful at reducing poverty are those that havedeveloped sound economic policies and enjoyed rapid economic expansion. And the pace of
expansion is directly linked to the degree of openness to the rest of the world and the growth of trade.
Of course, sound economic policies, which must encompass well-functioning institutions,
and investment in education and infrastructure, are crucial.  But as economies become more open,sound economic policies become more  necessary, more effective – and easier to implement.  A
virtuous circle is created.
The challenge in Cancún
All countries stand to benefit from an ambitious outcome of the negotiations.  The fewer
the restrictions on world trade, the more rapidly it will expand.  The consequence will be faster
global economic growth.  Countries, firms and citizens will gain access to new markets. New
export opportunities will be created.  The potential welfare gains are huge.  Liberalizing trade will
help unlock the opportunities of globalization for m illions of people around the  world.
But just as all countries stand to gain, all have a part to play in making the Doha Round a
success. Developing economies have, too often in the past, struggled with the consequences of tradeWT/MIN(03)/ST/20
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barriers and restricted access to potential markets for many of their exports. That, sadly, is still
true today. A genuine commitment to liberalization by the industrial countries must ultimately
means that they open up their markets and reduce producer subsidies and other protection.
But in many cases barriers to trade among the developing economies are even higher than
between rich and poor nations.  So de veloping economies also have their part to play – and it is one that
will bring them enormous gains. Trade flows among developing economies are increasingly
important – almost  40 per cent of their exports now go to other developing economies. It is those
developing economies themselves that will reap most of the benefits from significantly lowering their
own trade barriers.
Developing economy concerns
Despite the benefits of liberalization many of the world's poorer countries are apprehensive
about what a Doha settlement might mean for them. At the General Council meeting on coherence last
spring, many Members expressed concern about the possible costs involved in coping with the  short-
term consequences of the  Round and the loss of preferences in  particular. They worry that these costs
would be high , and painful to  live with;  or that they would be beyond their capacity to  meet.
Based on what the WTO and its Members have learned from past liberalizations, and from our
preliminary research, we do not expect the temporary costs of adapting to a Doha settlement to be
significant for the vast majority of countries. The lowering or elimination of tariff and non-tariffbarriers as a result of Doha will,  of course , take place over several years:  this itself mitigates many of
the potentially negative impacts. It is also importa nt to remember that because these changes to the
trading environment will be planned, any policy response to mitigate the impact can be carefully
designed and implemented in a timely manner.
But we recognize that such assurances will not put all minds at rest. Ignoring the concerns
that remain would be wrong – and it could undermine the prospects for a successful conclusion of the
Doha Round.
A new proposal from the IMF
So in the spirit of the Marrakesh Declaration, and in response to a request from the WTO's
Director-General, the IMF is prepared to undertake a new trade initiative to make  financial
assistance available to developing countries that f ace the prospect of a challenging adjustment to
the impact of multilateral trade reform.
This initiative will complement the very active programme of technical assistance and policy
advice we offer our Members on a brand range of trade policy issues. It is specifically tailored to
address temporary external imbalances that might result from the multilateral trade reforms we all
ultimately believe are desirable.
Under this proposed initiative, we would commit to provide financial support in the
context of new fund-supported programmes, or existing programmes, to those Members that face a
net negative impact on the balance of payments in the near term from the effects of the Round.
And we are prepared to offer  additional financial help in those circumstances where
the actual impact turns out to be greater than  anticipated.
We do not believe these costs are likely to be large, even for the small number of countries
affected.   But we are prepared to help meet them where they materialize.WT/MIN(03)/ST/20
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This proposal is designed as a kind of contingent insurance. Our objective is to reassure those
countries that are  participating in the multilateral trade r ound.  They will have access to additional
financial help in addressing any near-term transiti onal costs that might, in some cases, accompany the
multilateral trade reforms.  These will, of course, have substantial economic payoffs over time.
We have outlined this proposal to the IMF Board in general terms, and I am pleased to say they
are supportive of this initiative.  We will consult closely with the  Director-General of the WTO and the
Secretariat as we design the  details.  We intend to present a fleshed-out proposal to the Fund's Board in the
coming months.
As I said at the outset, the Fund's strategy on tr ade is clear – and it is, of course, wholly in accord
with the objectives  of the WTO.  That is why, at this juncture, the Fund believes it is vital  to provide the
reassurance that  some countries understandably seek.  No government should have to defer a commitment
to further trade liberalization, or the  Doha Round as  a whole, on the grounds that they might not be able  to
cope with any potential short-term effects on the ba lance of payments.  And no country should feel that  the
Fund would be reluctant or unw illing to assist in those – hopefully rare – cases where
transitional problems would pose genuine difficulty.
The full benefits of trade liberalization can only be realized in a multilateral context.
The more widespread the dismantling of barriers, the greater  the rewards for all countries and
their citizens. The IMF stands ready to do whatever it can to ensure those rewards are
ultimately realized.
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