WORLD TRADE WT/MIN(96)/ST/33
9December 1996
ORGANIZATION(96-5197)
Original: English MINISTERIAL CONFERENCE
Singapore, 9-13December 1996
WORLD BANK
Statement byMr.Gautam S.Kaji
Managing Director, Operations Policies andProgrammes
(Speaking asanObserver)
Thepast10years havewitnessed asea-change inattitudes among developing countries toward
international trade. Many haveradically liberalized theirtrade regimes, andmost enthusiastically
embraced theUruguay Round, wisely rejecting thepassivity andpreference seeking thatcharacterized
theirprevious stances.
Theevidence thataliberal traderegime enhances long-run economic performance isnowquite
overwhelming. Open economies grew byanaverage 2percentperyearfaster thanclosed onesover
thelastthree decades. Theeconomies ofEastAsia have ledtheworld interms ofbothtrade
liberalization andgrowth. Untilrecently, Chile stood apartinLatin America withitssimple transparent
trade policy andstrong economic growth. Now ithasseveral imitators. Alsowithin Africa trade
liberalization hasbeenassociated withimproved performance, asMauritius andUganda show.
Aswegather attheWTO 'sfirstMinisterial Meeting toreview thepastfewyears andthe
formidable work programme before us,weshould recall thatonlytheactions thatindividual countries
undertake willingly canleadtolasting liberalization. TheWorld Bankhaslongappreciated thatreform
programmes onlysucceed where theyhavestrong political commitment andaregenuinely "owned"
bygovernment andsociety. Similarly, GATT experience hasshown theadvantage ofbolstering support
forimport liberalization bycoupling ittoliberalizations elsewhere which benefit exports.
TheWorld Trade Organization andWorld Bank havecomplementary roles inencouraging
andsupporting willing liberalization. TheBank helps countries adopt liberal trading regimes through
itsadvice andlending programmes. Itcanassist inthedesign, analysis, andimplementation ofreform,
forexample, bydrawing onpractical lessons from elsewhere, byidentifying thebenefits ofreform,
andbyfinancing necessary restructuring -thatisthecosts ofreform.
TheBank'sfocus isprimarily unilateral -emphasizing thatcountries themselves arethemain
beneficiaries oftheirtrade reform, notpartners. However, theBank alsorecognizes theimportant
spillover effects thatcanarisefromunilateral liberalization -themultilateral dimension, which isthe
principal focus oftheWTO. Bybringing partners together, theWTO allows countries to"lock in"
theirunilateral reforms bybinding tariffs andotherpolicies multilaterally, tonegotiate improved access
toothers 'markets and,through itsmultilateral rules, toseekanequitable andefficient world trading
system.
What aretheprinciples andthepriorities thatshould govern thesystem overthenextfewyears?
Perhaps themostimportant isnon-discrimination -bothbetween different goods andsectors andbetween
different countries andregions. Thatis:weshould aimatasingle-level playing fieldforinternational
trade -andwithgoals atbothends! Anything lesswillreduce thegains from trade byencouragingWT/MIN(96)/ST/33
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private entrepreneurs tobuyfrom favoured, butinefficient, suppliers. Inthisrespect theintentions
ofthemembers ofAPEC toliberalize collectively butonamost-favoured-nation basisaretobehighly
commended.
Letmestartwithmanufacturing. Theagreement toeliminate theMultifibre Arrangement was
ahuge victory fortheprinciple ofnon-discrimination. Weshould strive earnestly toseethatitis
implemented inspirit aswellasinletter. Doing sowillallow afarmore rational allocation oftextile
andclothing activity around theworld, andthesooner wereapthese gains thebetter. By2005 these
gains could amount tobetween US$50 and100billion peryear(in1992 prices).
Thepredicted effects oftheMFA phase-out illustrate howtrade reform cancreate losers as
wellaswinners. They alsoshow thatforcountries undertaking genuine liberalizations, thegains far
outweigh thelosses. Producers indeveloping countries willnolonger facequotas inindustrial countries:
efficient oneswillgainbutothers willloseastheyareexposed tonewcompetition. These countries,
however, willmake corresponding gainsastheyswitch resources intomoresophisticated markets which
havegained from other aspects oftheUruguay Round package. Consumers inindustrial countries
willalsogainastheyfacelower prices, andtoamuch larger extent thantheproducers inthesecountries
lose. Indeed, itisworth noting thattheMFA'soriginal advocates stand togainmostfromitsabolition.
According totheWorld Bank projections, theUnited States andCanada stand togainUS$29 billion
andEuropean Union US$28 billion asaresult oftheMFA abolition.
ButtheMFA isnottheonlybarrier facing textile exporters. Many developing countries also
haverestrictions ontextile products. These tooneedtobeliberalized ifdeveloping countries areto
reapthefullbenefits ofspecialization byimporting theitems ofclothing thattheydonotmanufacture
efficiently themselves andbygranting theirexport industries access tothenecessary inputs ofcloth
andaccessories.
Ishould alsoliketohighlight agriculture andservices. Inmany developing countries agriculture
isburdened bythecost-increasing effects ofindustrial protection. Removing thesebarriers willincrease
foodproduction andagricultural exports. Forexample, Chile andKenya bothsawhuge booms in
agricultural exports astheyliberalized manufacturing. Itwillalsoimprove foodsecurity andraise
rural incomes. Thisisaparticularly important outcome, foritaddresses immediately anddirectly
aprincipal cause ofpoverty.
Industrial countries andsome developing countries dotheopposite, protecting agriculture at
theexpense ofindustry. Inthese countries tariffs onagricultural products remain highevenafterthe
Uruguay Round, andinmany cases, their administration isstillcomplex andopaque. Through
tariffication, theRound setthescene foraboldsimplification andliberalization ofagricultural policies.
When negotiations resume in1999, Ihopethatgovernments willrisetothatchallenge andletmarkets
intoagriculture inthesamewayastheyhaveintomostofmanufacturing. Thegainswould beenormous:
hadtheUruguay Round cutsbeenapplied to1994levels ofprotection instead ofthose ofthelate1980s,
thebenefits would havebeennearly 100billion dollars greater, andgoing beyond thiswillgenerate
evenmore.
Similarly fortradeinservices. TheUruguay Round brought services intothemultilateral fold,
butmuch remains tobedone, especially bydeveloping countries. Effective service sectors openmany
opportunities. Forexample, Jamaica 'sdata-processing andvoice-service industries illustrate howaccess
toanefficient andcheap telecommunications sector isvital. Andagenerally efficient service provision
enhancescompetitivenessthroughouttheeconomy.Thus,toreturntomythemeofwillingliberalization,
Ministers should viewservice negotiations notsomuch amatter ofgiving away market access asone
ofwillingly allowing domestic entrepreneurs tochoose themostefficient provider. Asmall immediate
stepinthisdirection would betoadopt theproposed exchange ofinformation onnational laws, policies,WT/MIN(96)/ST/33
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andregulationsaffectingtradeinservices.SuchaswapwouldnotonlyincreaseMembers'understanding
ofeachother butwould prompt ahealthy review byeachofitsownpolicies.
Theworld trading system andthedeveloping countries havecome averylongwayinthelast
decade. Governments arequeuing uptobecome Members oftheWTO, wehavealargely common
setoftrading rules forallMembers, andwehaveseenwidespread anddeepliberalizations, both
unilateral andmultilateral. Indeed, partly because theyhadfurthest togo,thedeveloping countries
havetaken thelargest stepsinterms ofliberalization. Many countries inLatin America andAsiahave
unilaterally slashed theirtariffs sincethemid-eighties. Moreover, intheUruguay Round, high-income
anddeveloping countries bothreduced actual tariffs onabout 30percentoftheirimports; butwhile
theaverage domestic priceoftheaffected imports wascutbyabout 3percentinhigh-income economies
itwascutbyabout 8percentindeveloping countries.
Thechallenge istocontinue thismomentum andtoestablish theparameters fortheevolution
oftheworld trading system inthenextcentury. Recognizing thecomplementarity oftheirrespective
roles, theWorld Bank ispleased tobeabletosupport andcooperate withtheWTO anditsMembers
astheytackle these important issues.
Itisaparticular pleasure toconfirm that,liketheIMF, theWorld Bankhasrecently completed
thenegotiation ofaformal cooperation agreement withtheWTO. Thishasbeenapproved bytheWTO 's
General Council andbytheWorld Bank'sExecutive Board, andhasnowbeensubmitted totheBank's
Board ofGovernors forfinalapproval. ThisAgreement willbuild upon andextend theinformal
cooperation thathaslongcharacterized Bank-GATT, andlatterly Bank-WTO, relations. Together with
theWTO-IMF Agreement, theWTO-Bank Agreement setsthestage forthethree Organizations to
workcoherentlytoestablishasingle-levelplayingfieldforglobaltradeandtoassistcountriesinadopting
openpolicies tosupport growth andeliminate poverty.