WORLD TRADE
ORGANIZATIONWT/TF/COH/S/7
29 April 2003
(03-2249)
COHERENCE IN GLOBAL ECONOMIC POLICYMAKING AND COOPERATION
 BETWEEN THE WTO, THE IMF AND THE WORLD BANK
Note by the Secretariat1
I. SUMMARY
1. Achieving more coherent global economic policymaking is one of the five core functions of
the WTO.2  Its ability to do so depends on it carrying out its other functions successfully – providing a
forum for liberalization, ensuring strict observance of its multilateral rules and disciplines, and
contributing to policy surveillance.  Beyond the direct commercial benefits this brings to WTOMembers, a well functioning, open, rules-based, trading system makes trade policies more predictable
and effective tools for economic management.  It increases resource flows to developing countries,
strengthens markets and economies structurally, and helps underpin macroeconomic and financial
stability.  That, in turn, makes trade ministries and the WTO more influential partners in cooperating
with finance and development ministries, and with the IMF and the World Bank, to generate the broadcoherence of economic policymaking that is sought at national and international levels, and to
advance the shared objectives of sustainable growth, development and poverty reduction.
2. The greatest contribution that the WTO can make to more coherent policymaking in current
economic circumstances is to move ahead with the Doha Work Programme, in particular the market
access negotiations.
3. Private sector debt financing to developing countries has declined in the past few years,
without compensating increases in official development assistance.  Exporting goods and services andattracting foreign investment have become even more important means for developing countries to
supplement their own financial and real investment resources, upgrade technology, raise productivity,
and boost their economic growth prospects.  The World Bank estimates that with a supportive
domestic policy environment, full global trade liberalization in goods alone can result in gains of
around 5 per cent of income in developing countries and lift 300 million people out of poverty by2015, the target date for achieving the UN Millennium Development Goals.  No other area of
international economic cooperation – debt relief or  official development assistance, for example –
holds out such a promise.  Agricultural trade liberalization has a crucial role to play.  Rural poverty is
the most corrosive and endemic form of poverty in the world, and continuing high levels of
agricultural trade restriction and distortion are a large part of that problem.
                                                     
1 Prepared in consultation with staff of the IMF and the World Bank.
2 Article III of the Marrakesh Agreement Establis hing the World Trade Organization. The detailed
mandate is contained in the 1994 Marrakesh Ministerial Declaration on Coherence (Annex 1).  The GeneralCouncil approved formal cooperation Agreements with the IMF and the World Bank in November 1996, andinstructed the Director-General to inform Members and consult with them regularly, under the auspices of the
General Council Chairman, on matters relating to implementation of the Agreements (WT/L/194 and Add.1).The Agreements are contained in WT/L/195.  The Director-General reports annually to the General Council.
His report for 2002 is contained in WT/TF/COH/6.WT/TF/COH/S/7
Page 2
4. Increased market access also has a key role to play in enhancing financial stability and
generating sustainable solutions to problems of foreign debt.  Market access restrictions – in
developed and developing countries – increase the risk of financial crisis and debt problems
occurring, and contribute to the length and difficulty of the economic adjustment that is needed when
they do.  Trade helps to relieve the adjustment burden, and since foreign borrowing representsdeferred trade, the long-term solution in all cases for indebted countries is to increase their export
earnings.
5. The IMF and the World Bank have the means to support an ambitious and successful
conclusion to the Doha market access negotiations in a variety of ways.
6. In industrialised countries, where political resistance to trade liberalization often reflects poor
public understanding of the costs of protectionism – higher taxes and lower income at home, along
with less growth, fewer jobs and more poverty abroad – trade policy surveillance and advocacy by theIMF and the World Bank, and by finance and development Ministers, complements significantly the
means available to the WTO and trade Ministers to address this problem.
7. The IMF and the World Bank can also help reassure developing and least-developed countries
that they will receive technical and financial support for trade liberalization and reform within their
fragile economic environments – to correct temporary external imbalances;  to manage any loss offiscal revenue from reducing tariffs;  to weathe r a period of adjusting to the erosion of trade
preferences;  to secure adequate and reliable trade-financing facilities;  and above all, to take
advantage of increased export opportunities by investing in trade-related institutions and infrastructure
and in the supply side of their economies.
8. IMF and World Bank support for the Doha Work Programme depends in large measure on the
preferences of their member countries.  In the fi nal analysis, it is the government of the country
concerned that determines what priority it wishes  to attach to trade in the overall programme of
support that it seeks from the international community.  This points to the importance of trade
officials in developing countries and LDCs cooperating with their counterparts in other ministries at
the domestic level to ensure that trade issues are properly factored into national economic anddevelopment programmes – coherent economic policymaking has to begin at home.
9. Where trade issues are identified as a priority, they need to be factored into each country’s
Poverty Reduction Strategy Papers (PRSP) and Coun try Assistance Strategies (CAS), which are
prepared with the support of the IMF and the World Bank and are the main basis for attracting
multilateral technical and financial support.  The attention devoted to trade in PRSPs and CASs to
date has been disappointing.  Raising the profile of  trade in them is a priority for the WTO in its
cooperation with the IMF and the World Bank.
10. Closer cooperation with the IMF and the World Bank in support of the Doha Work
Programme could be encouraged in a number of ways:
• Providing the IMF and World Bank with observer status in the TNC and its subsidiary bodies
would give them first-hand information on where their contribution to the success of the trade
negotiations can most usefully be made.
• Facilitating and accelerating WTO accession procedures for all low income developing countries,
and for emerging market economies where the stability and predictability of trade relations is an
important part of their economic stability overall, would help enhance the success of the policies
and practices that governments promote through the WTO, the IMF and the World Bank.WT/TF/COH/S/7
Page 3
• Adopting WTO modalities ("credit") for the treatment of autonomous liberalization in the area of
trade in goods, as has recently been done for trade in services, can encourage trade liberalizationand ensure that urgently needed trade policy reforms that would merit IMF and World Bank
support are not delayed.
• Ensuring that trade liberalization, financial sector liberalization and capital account liberalization
are properly sequenced in developing countries, and in emerging market economies in particular,
and that financial services liberalization is underpinned by prudential regulation and financialsector reform, can encourage more focused support for Members from the IMF in the context of
its work on financial stability.
• Crafting an approach towards Special and Differen tial Treatment in the WTO that reflects the
development priorities and institutional capacities of Members can facilitate the provision by theWorld Bank and other donors of greater technical and financial support than at present for trade-
related capacity building and supply-side development.  In low income countries, trade has tocompete for resources with other priorities, some of which may have a more direct claim to make
in terms of their contribution to economic development and poverty reduction.  While it is well-
established that trade openness and growth are mutually supportive, and that poverty reduction
requires economic growth, the direct impact of trade liberalization on different groups among the
poor can vary.  From the point of view of the World Bank’s mission of poverty reduction, this
highlights the importance of the timing and sequencing of trade liberalization, and the need to
embed it within broader strategies of development and poverty reduction aimed at mitigatingsocial and other adjustment costs, particularly where there is a danger that those costs will fall
disproportionately on the poor.
11. In the absence of a forum at the international level for regular contacts between trade officials
and their counterparts in finance and development ministries, consideration might be given to
identifying the best institutional vehicle within the WTO for consulting with the IMF and the World
Bank on priority areas for cooperation and on any problems that arise – from encouraging the IMF to
take fully into account the flexibility available to developing countries under WTO rules when
designing its trade policy conditionality, and sorting out any perceived problems of inconsistency
between IMF conditionality and WTO rules, to anticipating the design of future WTO rules and how
these might best be constructed to ensure coherenc e with international finance rules and development
practices.
II. IMPLEMENTING THE MARRAKESH COHERENCE MANDATE
12. For the WTO, the key to implementing the Coherence mandate has been the strengthened
multilateral trading system that resulted from the Uruguay Round.  Increased market access, broader
sectoral coverage, strengthened rules, and effective dispute settlement have meant that trade policycan play a more substantial role in ensuring the coherence of global economic policymaking.
13. Institutional cooperation between the WTO, the IMF and the World Bank has been able to
build on that.  It has evolved considerably over the past ten years around two main themes.  One is
viewing trade reform and trade liberalization from the perspective of economic development and
poverty reduction, with complementary efforts in favour of low income developing countries to
increase their market access, help them develop the supply-side of their economies and build trade-
related capacity.  The second is linkages between trade and financial policies in the context offinancial sector liberalization and reform, crisis prevention and financial stability.
14. Increased market access is key in both of these areas, and since the Doha Ministerial
Conference it has become a primary focus for institutional cooperation in support of an ambitious and
successful conclusion to the trade negotiations.  Removing trade restrictions and trade-distortingWT/TF/COH/S/7
Page 4
measures can make a singularly important contribution to reducing poverty and indebtedness,
increasing flows of financing for development, strengthening economies structurally, and boosting
long-term growth.
15. More generally technical and financial assistance to help developing countries and economies
in transition to implement trade re forms, monitoring and surveillance of trade policy developments,
and collaboration in analysis and research of trade-related issues are core areas of institutional
cooperation.
A. TRADE , DEVELOPMENT AND POVERTY REDUCTION
16. With many least-developed and other low income developing countries suffering from low
and falling shares of world trade, declining terms of  trade, unsustainable levels of foreign debt and
negligible new private capital inflows, the intern ational community proposed in the mid-1990s a new
approach that coupled enhanced market access, debt relief and increased foreign aid with support fordomestic macroeconomic and structural reform.
3  The result has been a series of complementary
multilateral initiatives that have involved close cooperation between the WTO, the IMF and the World
Bank – the IMF/World Bank Initiative for Highly Indebted Poor Countries (HIPC);  the introduction
of Poverty Reduction Strategy Papers, that provide for a coordinated response by the international
community to treating each low income countr y’s development and poverty reduction needs
comprehensively;  the WTO Plan of Action for the Least-Developed Countries;  and the launch of the
Doha Development Agenda.
17. In 1996, WTO Ministers agreed the WTO Plan of Action for the Least-Developed Countries
(LDCs), which called for preferential improvements in market access for LDC exports and increased
assistance to them for trade-related capacity-building and to remove supply-side constraints on theirexport capacity.
4  These were followed up in 1997 in the WTO through the High Level Meeting for
Least-Developed Countries, which produced two results.5
1. Market access and trade preferences
18. One was to begin implementing an initiative to provide duty-free and quota-free treatment to
LDCs’ exports, an initiative that was reinforced  in Doha when WTO Ministers committed themselves
to consider additional measures to progressively improve market access for LDCs.6  The initiative was
supported by the Managing Director of the IMF and the President of the World Bank at the time, with
the hope that it could be extended to low income developing countries more generally, and the
indebted countries in particular as a valuable complement to measures being taken under the HIPC
Initiative.  A solution in all cases to creating more sustainable levels of foreign debt is for indebted
countries to increase their export earnings.
19. Removing trade barriers and tariff escalation on exports from least-developed and low income
developing countries through the Doha trade nego tiations will make a clear contribution to more
coherent trade, financial and development policymaking.  As private sector debt financing to
developing countries has diminished, without compensating increases in official flows of
development financing, exporting goods and services and attracting foreign investment have become
even more crucial for increasing their financial and real investment resources.  This has beenemphasised in the 2002 Monterrey Consensus on Financing for Development, and repeatedly by
finance and development Ministers at IMF and World Bank meetings.  The World Bank estimates that
                                                     
3 An expression of this was the 1996 G-7 Agreement on "A New Partnership for Development".
4 WT/MIN(96)/14.
5 WT/LDC/HL/M/1.
6 WT/COMTD/LDC/W/28, table 8, contains a list of measures taken between 1996 and 2002.WT/TF/COH/S/7
Page 5
with a supportive domestic policy environment, full global trade liberalization in goods alone can
result in gains of around 5 per cent of income in developing countries and lift 300 million people out
of poverty by 2015, the target date for achieving the UN Millennium Development Goals.  No other
area of international economic cooperation – debt relief or official development assistance, for
example – can promise as much.  Agricultural trade liberalization has a crucially important role toplay in this regard, because poverty is concentrated in rural areas and activities in poor countries.
20. An issue that arises in the context of the Doha market access negotiations is the value of
special trade preferences for groups of low income developing countries and the effects that
multilateral trade liberalization on an MFN basis will have in reducing their current margins of
preference.  Preferences are by their nature discriminatory – part of the market share gained by
beneficiaries of a preference scheme come at the expense of competing exporters who are excluded
from it.  A current example is that nine poor countries which qualify for assistance under the HIPCInitiative are not LDCs and are therefore excluded from enhanced trade preferences granted under the
WTO’s Enabling Clause.
7  While it is true that multilateral trade liberalization through the Doha
market access negotiations will erode preference margins for current beneficiaries, it is equally true
that it will improve market access and export earning opportunities for other low income countries.
Furthermore, MFN liberalization will accelerate adjustment in importing countries out of sectors inwhich low income developing countries are most competitive – high margins of preference are a
reflection of the fact that MFN trade barriers in these sectors are still protecting substantial domestic
production in importing countries and denying exporters in low income countries important market
access opportunities.
21. A recent IMF study estimates that the welfare losses from preference erosion in most LDCs
are likely to be relatively modest – for LDCs in aggregate, less than 2 per cent of their exports – and
they could comfortably be compensated through increased assistance to affected countries.
8
Assistance would be particularly critical for individual LDCs whose dependence on preferences ismuch higher than the average – 10 per cent of exports in a few cases.  Confirmation that such
assistance would be forthcoming to tackle problems that  arise in this context has particular value.  The
IMF suggests in its study, for example, that financial assistance, where warranted, would best be
provided through its existing financing facilities;  in assessing balance-of-payments need, the IMF
would take account of potential losses from preference erosion as one of the factors determining
prospects for a country’s exports.
2. The Integrated Framework for LDCs
22. The second result of the 1997 High Level Meeting was the creation of the Integrated
Framework for Trade-Related Technical Assistance for LDCs.  As two of the six intergovernmentalorganizations involved in managing and implemen ting the Integrated Framework, the IMF and the
World Bank make important contributions to it directly through the provision of technical assistance
and support for capacity-building.  The World Bank, in particular, plays a key role in coordinating the
preparation of trade diagnostic studies to assist LDCs to "mainstream" their trade-related needs into
their national development plans and Poverty Reduction Strategy Papers, so as to secure donorfinancing.
23. Accelerating implementation of the Integrated Framework process, following-up the trade
diagnostic studies and encouraging LDCs to fully reflect trade issues, as appropriate, in their
development planning mechanisms, such as their Poverty Reduction Strategy Papers, is a shared
                                                     
7 HIPC countries that are not LDCs are:  Cameroon, Republic of the Congo, Côte d’Ivoire, Ghana,
Guyana, Honduras, Kenya, Nicaragua, and Vietnam.
8 WT/TF/COH/14, "Communication from the IMF:  Financing of Losses from Preference Erosion".WT/TF/COH/S/7
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priority for the WTO and the World Bank and other agencies and donors involved.9  The Integrated
Framework is now in a critical phase. To be effective, it requires sustained support from the
international community and a commitment by recipien t governments to the process.  It is clear that
World Bank Consultative Group's meetings and UNDP Roundtables cannot be the only means of
securing financing for immediate follow-up to the di agnostic studies.  An expansion of the Integrated
Framework Trust Fund is needed to assist in funding priority technical assistance projects as a
bridging measure until trade is built into donor-supported country programmes.  In this regard, the
forthcoming High Level Meeting on Trade and Development in Denmark, involving Ministers from
leading donor countries, is an important opportunity to place the Integrated Framework on a firm
financial footing.
24. A wider effort to improve follow-up under the Integrated Framework is being made,
including the introduction of donor facilitators and the refinement of their roles, a clearer sense of thesequence of steps needed and country responsibilities involved following the completion of diagnostic
studies, and securing dedicated funds to enable LDCs to strengthen their institutional capacity to
participate in the diagnostic phase.  Success of the Integrated Framework will also rest heavily on the
willingness of partner governments to take a lead in the follow-up.
3. Supporting the Doha Work Programme
25. Since 2001, the Doha Work Programme has provided a natural focus for WTO cooperation
with the IMF and the World Bank on promoting development and poverty reduction.
26. Building on earlier WTO initiatives in favour of LDCs, the General Council recently adopted
guidelines to facilitate and accelerate their WTO accession procedures.
10  The rationale for this would
apply equally well to other low income and HIPC countries that are not already WTO Members, andapplying the guidelines more broadly would allow these countries to seek assistance from the IMF
and the World Bank for their accession processes.
27. The IMF provides demand-driven technical assistance primarily on fiscal and customs
reform.  This can be framed to meet the needs of countries that wish to reduce their reliance on trade
taxes as a source of fiscal revenue or to improve trade tax collection, and it is relevant to concerns thathave been raised about the potentially negative budgetary effects for developing countries of lowering
tariffs or other trade taxes where these still constitute a high proportion of their fiscal revenue.  The
implication is that trade liberalization would be pursued more vigorously in the absence of fiscal
concerns.  Studies by the IMF have acknowledged that this may be a problem in the short-term,
although the situation can vary considerably from case to case and the overall impact of trade
liberalization on tax revenues can be positive, especially when accompanied by a strengthening of the
domestic tax system .
11  Members that wish to address the potential revenue consequences of trade
liberalization through the design of the liberali zation itself and through domestic tax reform can
request policy advice and technical assistance from the IMF to do so.
28. The IMF is committed to assisting countries that  experience internal or external financial
imbalances with advice and – where warranted – financial support, including where the imbalances
are related to the process of trade liberalization and reform.  In addition to its regular, non-concessional financing facilities aimed at helping to stabilize temporary balance-of-payments
                                                     
9 Statement by the Director-General to the Seco nd Integrated Framework Mainstreaming Seminar,
1 November 2002.  The Integrated Framework is a matter of central attention in the current 6-month jointstrategy of the WTO Secretariat and World Bank staff.
10 WT/L/508.
11 WT/TF/COH/16 "Liberalizing Trade and Safeguarding Public Revenues", and IMF publication,
"Revenue Implications of Trade Liberalization", Occasional Paper 180, Washington D.C., 1999.WT/TF/COH/S/7
Page 7
difficulties, the IMF provides concessional (low-interest) loans to low income countries experiencing
protracted balance-of-payments difficulties through the Poverty Reduction and Growth Facility
(PRGF), and debt relief under the HIPC Initiative to help reduce the burden of their external debt.12
Countries can also access IMF financing through the Compensatory Financing Facility (CFF), whichis designed to address balance-of-payments needs associated with temporary export shortfalls orcereal import excesses, a matter that has been of considerable interest to LDCs and net food importing
countries in the context of agricultural trade reform under the WTO.  However, the CFF offers only
non-concessional financing, and low income countries are encouraged to meet such needs instead
through the PRGF, access to which can be augmented as needed in the context of shocks.  The CFF
has been used very little, and the IMF has begun a review of the facility.  The review is tasked with
considering how the IMF can in future best respond to the need for rapidly disbursing balance-of-
payments assistance in the context of external shocks, e.g., from commodity prices, sudden loss ofexport markets, or natural causes.  It is scheduled for completion before the end of 2003.
29. Achieving a pro-development outcome from the Doha trade negotiations is a central objective
in the World Bank’s overall mission of poverty reduction.  The prospective contribution that a
successful Doha Round can make to poverty reduction and implementing the UN Millennium
Development Goals, particularly through increased market access, gives the World Bank a keenincentive to support and cooperate closely with th e WTO.  With its country-level involvement and
expertise, it is well equipped to make a substantial contribution to developing countries’ participation
in the trade negotiations and the implementation of the results.
30. The World Bank’s principal comparative strength is in the integration of trade and
development at the country level.  Over the past year it has stepped up its efforts in this regard, underthe direction of a new Trade Department that has been set up to coordinate and lead work on trade
throughout the organisation – trade strategies at the regional and country levels, as well as research
and analysis, technical assistance and training, and capacity building.  As a way of improving
communication on trade within the World Bank, one of  the functions of the new Trade Department is
to review all Bank lending operations involving trade and new Country Assistance Strategies.
31. The trade agenda prevalent in the 1980s and 1990s in developing countries entailed
predominantly the autonomous elimination of quotas and tariff reduction, often supported by World
Bank lending   In the case of the LDCs and some other poor countries, mainly in Africa, this did not
lead to the vigorous supply response that occurred in many other developing countries.  While this
may have been due to incomplete border reforms in some cases, in the World Bank’s view supply
responses were also held back by export market access barriers and by a variety of behind-the-border
constraints that raise the transaction costs of trade – ranging from weak governance and weak tradefacilitating institutions, to poor infrastructure.
32. World Bank instruments for supporting country-level trade activities have been changing to
address this new trade agenda.
13  There has been a general trend away from adjustment lending for the
purpose of supporting the liberalization of border measures, and increased use of a wider array of
instruments for addressing trade issues – technica l assistance and capacity building support to the
public sector, and public/private sector institution building and facilitating private sector activity in
trade given the central role it plays in generating export supply capacity.
33. In the World Bank’s view, the core constraints that hamper trade in goods most directly are in
the areas of trade facilitation and compliance with product standards.  It estimates that its lending
                                                     
12 WT/WGTDF/W/2.
13 World Bank lending for trade-related activities, broadly defined to include infrastructure, accounted
for around 26 per cent of its total lending from 1994 to 1999 (about $2 billion a year).WT/TF/COH/S/7
Page 8
operations for trade facilitation activities – including institution building, physical infrastructure and
trade-financing – made up over 80 per cent of its total trade lending in the last two years.
34. In looking forward to developing WTO cooperation further with the World Bank on trade
issues, two factors need to be kept in mind.
35. One is that the scope of World Bank activities in this area depends in large measure on the
preferences of its member countries.  In the final analysis, it is the government of the country
concerned that determines what priority it wishes  to attach to trade in the overall programme of
technical and financial support that it seeks from the World Bank and other donors.  This points to the
importance of trade officials in developing countries and LDCs cooperating with their counterparts in
other ministries at the domestic level to ensure th at trade issues are properly factored into national
Poverty Reduction Strategy Papers (PRSP) and Country Assistance Strategies (CAS) that are the basis
for attracting World Bank and other donor support.  The attention devoted to trade by the countries intheir PRSP and CAS has been low to date.  This is expected to change as upcoming PRSPs are
broadening their focus beyond debt relief, governance, public expenditure management and delivery
of public services (especially health and education) to an increasing focus on growth as part of a
strategy of sustained, broad-based poverty reduction.  Given the importance of trade to the growth
agenda, the World Bank expects that trade issues will become more prominent in its future PRSP andCAS-related activities.
36. The second issue is that even where trade issues are identified as a priority, they have to
compete for scarce World Bank and donor resources with other priorities, some of which may have a
more direct claim to make in terms of their contribution to the goal of poverty reduction.  The links
between trade liberalization and poverty reduction are complex, and in some respects controversial.While it is well-established that trade openness and growth are mutually supportive, and that poverty
reduction requires economic growth, the direct impact of trade liberalization on different groups
among the poor can vary.  This points to the importance of the timing and sequencing of trade
liberalization, and to the need to embed it within broader strategies of development and poverty
reduction aimed at mitigating social and other adjustment costs, particularly where there is a dangerthat those will fall disproportionately on the poor.  In many cases, World Bank and donor support for
the effective implementation of trade reform will depend on the availability of new resources.
37. As the Doha trade negotiations advance, this suggests a need for close cooperation between
the WTO and the World Bank, and between trade, finance and development officials, over WTO
work on special and differential treatment for developing countries that can affect the timing and
sequencing of trade liberalization.   Finding an approach that enables WTO rules to reflect the
different priorities and institutional capacities of Members will be instrumental in facilitating theprovision by the World Bank and other developmen t agencies and donors of technical and financial
support for implementation of the results of the negotiations.
B. T
RADE RULES , TRADE LIBERALIZATION AND FINANCIAL STABILITY
38. The stability and security that WTO rules bring to international trade flows makes a direct and
important contribution to stability in other areas of the world economy, particularly internationalfinance.  This was demonstrated during the financial crises that a number of emerging market
economies encountered in the late-1990s.  The rules of the trading system acted as a shock absorber,
keeping markets open and ensuring that financial crisis was not translated into a trade crisis too.
14  If it
had erupted onto a weak trading system and provoked a protectionist response in the crisis-hit
countries or their main trading partners, the consequence would have been deeper and much longer-
                                                     
14 At the time, WTO Ministers underlined "that keeping all markets open must be a key element in a
durable solution to these difficulties" (WT/MIN(98)/DEC/1).WT/TF/COH/S/7
Page 9
lived recessions in economic activity than actually occurred.  As it was, very few new trade
restrictions were applied, and restraint was reportedly exercised in the use of contingency trade
measures to avoid penalising exports from crisis-hit economies.15  Once the immediate crisis was past,
continued trade liberalization and reform under WTO rules has helped emerging market economies to
correct domestic market distortions and structural weaknesses, improve resource allocation, andreduce their vulnerability to financial crisis and external shocks.
39. One of the lessons learned from this experience is the importance of WTO Members dealing
expeditiously with requests for accession from emerging market economies that are not already WTO
Members.  Greater stability and predictability of trade relations for these countries can help reduce the
risk of crises in private sector confidence occurring and contribute to subsequent recovery.
40. Many developing countries and economies in transition are pursuing both trade and financial
liberalization in circumstances where global markets can produce, at times, large and potentiallydestabilising capital movements.  The experience of recent financial crises highlights the importance
of ensuring that trade liberalization, financial sector liberalization and capital account liberalization
are properly sequenced, and that financial services liberalization is underpinned by prudential
regulation and financial sector reform.  It also underlines that trade restrictions should not be used
inappropriately to tackle problems originating in macroeconomic imbalances or the capital account.These have become important areas for institutional cooperation, in particular for the WTO and the
IMF which are the two principal economic rule-making organizations.  In both cases the rules are
evolving, and in certain areas their agenda are showing signs of increasing convergence.
41. Prominent among these are the GATS rules and the Doha market access negotiations on
financial services, which have an important bearing on the IMF’s work to support financial stabilityand its advice on policies and potential rule-making relating to the capital account and debt.
16  The
prudential carve-out clause of the GATS allows Members to impose restrictions on financial services
to safeguard the integrity of their financial systems.  There is an evident parallel here with IMF work,
in the context of its adjustment programmes, surveillance and technical assistance, on the adoption
and implementation of good practices on prudential standards and supervision, as well as of policiesaimed at strengthening domestic financial sectors and mitigating systemic risks.  Financial sector
stability and transparency generally, and particularly in the context of financial sector liberalization, is
a matter of mutual interest to the WTO and the IMF.  The assessment of financial sector performance
and vulnerabilities under the Financial Sector Assessment Programme, which the IMF undertakes
jointly with the World Bank, offers scope for further cooperation with the WTO in this regard.
42. The overlap between the liberalization of trade in financial services and capital account
liberalization has been recognised since the GATS entered into force and Members established theirschedules of commitments under it, but the need to clarify the linkages has been raised recently by
some Members as a prerequisite to their undertaking new commitments in the Doha Round.
17  I n
some cases, financial sector liberalization can be synonymous with capital account liberalization;  in
others (e.g., financial advisory services) the link is negligible.  An area in which further cooperation
between the IMF and the WTO may be warranted in this regard is clarifying the circumstances inwhich the IMF might request a Member to impose restrictions on its capital account transactions
inconsistently with its specific commitments, under GATS Article XI.  A second is the scope of
                                                     
15 WT/WGTDF/M/3, p. 7.
16 The IMF received a mandate in 1996 to proceed with discussions to amend its Articles of Agreement
to cover capital account transactions.
17 A recent IMF paper provides some support for concer ns that rapid liberalization of financial services
might result in destabilising capital flows where it is accompanied by a weak domestic policy and regulatoryenvironment:  E. Prasad, K. Rogoff, S.-J. Wei and A. Kose, "Effects of Financial Liberalization on Developing
Countries:  Some Empirical Evidence" (2003).WT/TF/COH/S/7
Page 10
application of any future GATS safeguards agreement and the IMF’s role under GATS Article XII,
under circumstances in which there are serious or threatened domestic financial difficulties which
stand in only indirect relation to the balance-of-payments.
43. A decision by WTO Members to start negotiations on a multilateral framework on investment
would create an important new area for cooperation with the IMF, particularly in respect of anybalance-of-payments safeguard provisions that this might entail.
44. One of the issues that was highlighted by the Asian financial crisis was the difficulty
encountered by emerging market economies in securing access to traditional instruments of trade
financing (discounting letters of credit), which dried up temporarily along with access to most other
forms of debt-based financing.  This added to their problems of increasing exports to help ease the
adjustment process.  The matter was raised at the time by the Director General with the IMF and the
World Bank and discussed at the staff level, but the immediate problem resolved itself beforesolutions were identified.
18  Recently, the issue of creating more stable and predictable sources of
trade-financing has been raised in the WTO Working Group on Trade, Debt and Finance, and several
Members have encouraged new attempts be made to progress on this issue, whether at the multilateral
or regional level where some schemes already exist.  Lending for trade-financing by the World Bank
has evolved in the past few years from providing direct lines of credit to state finance institutions –which for various reasons have not been successful – to lending in support of the establishment of
insurance schemes.  The IMF is organizing a seminar, in May 2003, to review options for supporting
trade-financing during financial crises, including the role that IMF and other official sources of
financial support might be able to play.  This work should be followed closely in the WTO.
45. A longstanding area of cooperation has been the links between trade and exchange rates.  The
importance of stable exchange rates for conducting international commercial transactions and for
rules-based trade policymaking – and the concerns that can arise when instability sets in – was raised
in the context of cooperation between the IMF and the GATT Contracting Parties in the early 1980s.
Concerns resurfaced during the financial crises of the late-1990s, when large currency devaluations by
some crisis-hit countries, in certain cases under IMF programmes, provoked claims of "unfair trade"from import-sensitive sectors in some of their main trading partners and pressure for a trade policy
response.  Although this issue is likely to be a matter for attention only infrequently, when problems
do occur they can quickly take on a very high political profile, so it warrants a central place in
cooperation between the IMF and the WTO, for Members as well as management.
46. The single most important contribution that the WTO can make to enhance financial stability
is in the area of market access.  It is worth recalling in this regard that international borrowing is
equivalent to deferred trade.  Market access restrictions both increase the risk of financial crisisoccurring, and contribute to its depth and the difficulty of adjusting to it when it does.  A recent IMF
study has pointed to the financial vulnerability associated with countries significantly liberalizing
capital flows in the presence of a small export sector, be it the result of overseas market access
difficulties or restrictive trade policies by the country concerned.
19  In the case of financial crisis, a
key question is typically how the process of adjustment is to be shared between governments and theirpublic and private sector creditors.
20  Trade is a means of reducing the overall adjustment burden,
since the long-term solution in all cases is for countries to be able to increase their export earnings.
                                                     
18 A consultant's report, prepared for the IMF in September 1998, cast doubts on the viability of any
across-the-board solution and suggested  instead a case-by-case approach.
19 IMF World Economic Outlook, September 2002, chapter XX.
20 The IMF has undertaken work to examine how the private sector might be encouraged to play a
larger role in resolving crises when they do occur.WT/TF/COH/S/7
Page 11
C. WTO-IMF C OOPERATION
47. A key area for cooperation between the WTO and the IMF is based on the statutory
requirements of GATT Articles XIV and XV and GATS Article XI.  These underpin, in particular, the
GATT and GATS provisions and procedures that apply to IMF participation in consultations of the
Committee on Balance-of-Payments Restrictions (BOPs), and on any related IMF involvement indispute settlement proceedings.
48. An issue that is currently under review by WTO Members, in the context of the Doha Work
Programme on Implementation-Related Issues and Concerns, is the criteria for assessing the adequacy
of reserves and the justification for trade restrict ions, including the role of the IMF, under the BOPs
provisions of GATT Article XVIII:B.
21  IMF staff cooperated closely with the WTO Secretariat in
preparing background material for the BOPs Committee’s consideration of this issue, which has
pointed, inter alia , to the need to align the criteria for assessing the adequacy of a Member’s reserves
in the BOPs Committee with IMF "Guidelines for Foreign Exchange Management", to take account
of financial risks associated with a Member’s external debt position and the volatility of its capital
flows.22  The IMF has indicated its interest in being involved closely in further discussions on this
issue in the WTO, in light of the statutory role given to it under GATT Article XV:2.
49. Consultations took place between the Director-General and the Managing Director of the IMF
in 2001 on the need for close collaboration in future at the staff level, and where necessary for
consultations between the Director-General and WTO Members, on the drafting of language on
Special Exchange Agreements (SEA) in accession protocols for prospective WTO Members that are
not members of the IMF.23  This is a matter of importance to the IMF, given the IMF’s role under
GATT Article XV:2 in determining whether action by a WTO Member in exchange matters is inaccordance with the terms of an SEA.  The Director-General and the Managing Director of the IMF
believe firmly that positive consideration should be given in future to using the "model" SEA that was
adopted by the GATT CONTRACTING PARTIES in 1949, or in instances where that is not
appropriate that the IMF should be consulted fully in the drafting of an SEA.
50. An important area for cooperation between the WTO and the IMF is the consistency of policy
advice and prescription with the rules and disciplines of the two organizations.  Much of this is
accomplished through informal staff contacts.  In addition, the WTO Secretariat routinely reviews
IMF country documents that are made available to the WTO under the cooperation Agreement.  An
ex  post  review process of this nature is in keeping with the requirement of the Marrakesh Coherence
mandate that "cooperation … should avoid the imposition on governments of cross-conditionality or
additional conditions".  Given that the WTO Secretariat is not able to provide definitive
interpretations of WTO rules, the possibility of inconsistencies arising exists.  Known instances of thisoccurring have been rare, but two involving a potential conflict between IMF advice and WTO rules
have recently been raised in WTO meetings by Members.  One involved a Member temporarily
breaching its tariff bindings in the context of a tariff simplification exercise.
24  The second involved
emergency measures introduced in conditions of financial crisis by a Member to restructure and
provide financial assistance to its corporate sector.25  The Director-General and the Managing Director
of the IMF are determined to strengthen this area of cooperation, particularly in instances where a
                                                     
21 Tiret 3 of Job(01)/152/Rev.1, and WT/BOP/R/66.
22 'The Treatment of "Monetary Reserves" in WTO Balance-of-Payments Committee Consultations'
(WT/TF/COH/S/2), and "Reserve Adequacy" (WT/BOP/W/21).
23 GATT Article XV:7(b) requires that:  "The terms of any such agreement shall not impose obligations
on the contracting party in exchange matters generally more restrictive than those imposed by the Articles ofAgreement of the International Monetary Fund on members of the Fund".
24 WT/TPR/S/95, p.25.
25 WT/WGTDF/M/4, paras. 8-10 and 29.WT/TF/COH/S/7
Page 12
Member introduces measures that it considers urgent and critical to its balance-of-payments
adjustment but that might be questioned under WTO rules.
51. Two broader issues of the relationship between IMF policy advice and conditionality on the
one hand, and WTO rules and negotiations on the other, have been raised by Members.
52. One, which has been raised in Special Sessions of the Committee on Trade and Development
and in the context of discussions in the Trade Policy Review Body (TPRB), is that in the view of
some WTO Members IMF trade policy advice and conditionality should take more account of the
flexibility available under WTO rules for developing countries, and particularly LDCs;  for example
in maintaining applied tariffs up to their bound levels, phasing-in trade policy reforms gradually on
the basis of transition periods prescribed in WTO Agreements, and making use of exceptions for
development purposes.26
53. The second issue relates to IMF trade policy advice and conditionality that, once
implemented, is perceived by a Member to weaken its ability to engage in a future exchange of
reciprocal concessions in WTO trade negotiations.  This issue was discussed during the Uruguay
Round negotiations, and again in a General Counci l informal meeting on Coherence in 1999, in the
context of formally recognising "credit" in WTO negotiations so as to encourage governments to
engage in and sustain autonomous trade liberalization initiatives that go beyond existing contractualcommitments under the WTO, and to ensure that urge ntly needed trade policy reforms are not delayed
unnecessarily in anticipation of obtaining reciprocal trade concessions at some future date.  The
Services Council recently adopted modalities for th e treatment of autonomous liberalization in the
area of trade in services.
27  No similar action has yet been taken in the area of trade in goods.
D. INSTITUTIONAL COOPERATION THROUGH MEMBER GOVERNMENTS AND MANAGEMENT
54. While Ministers of finance and development and their officials meet together regularly, there
is no international forum in which trade Ministers or officials also participate.28  Linking trade policies
to finance and development policies at the multilateral level has therefore to be carried out very
largely indirectly, by management and staff of the WTO, the IMF and the World Bank.
55. IMF and World Bank staff receive guidance regularly from the International Monetary and
Finance Committee (IMFC) of the IMF and the joint IMF/World Bank Development Committee, as
well as from their respective Executive Boards.  Trade has become an increasingly important subject
of discussions in the IMFC and the Development Committee.29
56. In 2000, the Development Committee focused on "Trade, Development and Poverty
Reduction".  It endorsed increased roles for the IMF and the World Bank in supporting developing
countries’ efforts to expand trade within a co mprehensive framework for development, and in
cooperating with the WTO and other parties to develop effective programmes of trade-relatedcapacity-building, including through the Integrated Framework.  It also encouraged the World Bank to
mainstream trade into its country programmes by providing greater financial and technical support to
improve trade-related infrastructure and institutions.
30  In 2001, the Development Committee focused
                                                     
26 TN/CTD/W/4, WT/TPR/M/96 and WT/TPR/M/106.
27 TN/S/6, 10 March 2003.
28 A proposal to hold regular joint meetings of trade, finance and development officials was made
during the Uruguay Round, but difficulties were foreseen in marrying trade officials with finance anddevelopment officials based on the IMF/World Bank constituency system of representation.
29 Extracts from the communiqués are circulated for information to WTO Members (WT/TF/COH/-).
30 The World Bank estimates that its investment lending for trade-related activities and activities that
support trade by lowering transaction costs accounted fo r around 26 per cent of total Bank lending from 1994 to
1999.WT/TF/COH/S/7
Page 13
on the World Bank's role in assisting developing countries to "leverage trade for development"
through enhanced trade-related capacity building, and helping them to increase their ability to access
global markets, to implement existing trade agreements, and to prepare for future WTO negotiations.31
It endorsed an expanded role for the World Bank on trade, in lending at the country level throughCountry Assistance Strategies and Poverty Reduction Strategy Papers, and by working more closelywith its partners in the Integrated Framework.
32
57. The Director-General attends meetings of the IMFC and the Development Committee, and he
has been invited at times to brief finance and development Ministers on WTO developments.  Most
recently, he attended the IMFC meeting in April 2 003 and briefed finance Ministers on the Doha trade
negotiations and work programme.  In its communiqué, the IMFC underscored the urgency of
concrete progress toward multilateral trade liberalization under the Doha Round for supporting higher
economic growth and poverty reduction, and enabling developing countries to participate more fullyin the benefits of globalisation.
33
58. The Executive Boards of the IMF and the World Bank have paid greater attention to trade
issues in the past few years, both in the course of their regular country work and at times as a topic for
special consideration from a broader perspective.  In 2002, they discussed a joint staff paper on
"Market Access for Developing Countries’ Exports", which examined patterns and costs ofrestrictions and distortions on developing countries’ exports and concluded that the gains from
removing them could far outweigh the contribution of other international initiatives – notably official
aid and debt relief – to meeting the Millennium Development Goals for reducing poverty.
34
59. The staff report for the IMF’s biennial review of surveillance, discussed by the Executive
Board in April 2002, emphasized that addressing trade issues "is an essential part of surveillance incountries with serious trade distortions that hamper macroeconomic prospects, and, in particular, in
the large advanced economies whose trade policies have severe implications for developing countries’
market access."
35  The Executive Board has encouraged the IMF, in its bilateral, regional and
multilateral surveillance, to sharpen the focus on the global impact of the trade policies of the larger
economies.36  In the World Bank, the new Trade Department has responsibility for the centralised
review of the Bank’s trade-related activities at the country level.
60. IMF Executive Board Members meet periodically in the Board's Committee on the WTO
(CWTO), which makes recommendations to the Executive Board on issues that arise out of the IMF’s
relationship with the WTO or in connection with matters of common interest to the IMF and the
WTO.  In addition to following progress in the multilateral trading system and the Doha Work
Programme, the CWTO provides an opportunity for IMF staff and member Governments to exchange
views on specific issues that arise in the context of WTO/IMF cooperation.  WTO management andstaff are usually invited to participate.  Issues discussed recently in the CWTO include the relationship
between financial services negotiations in the WTO and IMF work on financial sector stability,
progress with the Integrated Framework, the links between IMF conditionality and WTO obligations,
and the handling of points of convergence in the substantive work of the IMF and the WTO in light of
their separate mandates and areas of responsibility.
                                                     
31 "Leveraging Trade for Development: World Bank Role", issues paper prepared by World Bank staff
for consideration at the Development Committee (circulated in WT/TF/COH/10 and JOB(01)/75).
32 Extract from the Development Committee Communiqué, 30 April 2001 (WT/TF/COH/9).
33 WT/TF/COH/17.
34 WTO staff contributed to the paper, which was issued in the WTO as WT/WGTDF/W/14.
35 IMF, Biennial Review of the Implementation of the Fund’s Surveillance and of the 1977
Surveillance Decision, March 14, 2002 (IMF document SM/02/82).
36 The Chairman’s Summing Up—Enhancing the Effectiveness of Surveillance—Operational
Responses, the Agenda Ahead, and Next Steps, IMF Executive Board Meeting 03/30—March 28, 2003.WT/TF/COH/S/7
Page 14
61. In the WTO, the General Council serves as the focal point for Coherence issues.  It agreed in
1998 to authorise its Chairman to convene special informal meetings on the subject from time to time,
at the request of delegations or the Director-General.37  Representatives of the IMF and the World
Bank are invited to participate.  These meetings allow Members to discuss finance and development
issues that have a bearing on the WTO work programme, and ways of increasing the WTO’scontribution to achieving greater coherence in global economic policymaking.  They also allow
Members to provide guidance to the Director-General and the Secretariat in carrying out the
cooperation Agreements with the IMF and the World Bank.  Three informal meetings have been held
to date, two in 1999 and one in 2001.  A number of issues have been raised and discussed at these
meetings
38, some of which have subsequently been taken up at a technical level by other WTO
Councils and Committees.  Recently, the issue of Coherence has been discussed further in the
Working Group on Trade, Debt and Finance.39  A number of proposals related to Coherence have also
been made in the Special Session of the Committee on Trade and Development.40
62. The Director-General consults regularly with the Managing Director of the IMF and the
President of the World Bank, to exchange views on matters of mutual interest and concern and to
review institutional cooperation.41   Contacts at this level are of particular value in advancing the
coherence mandate politically, in the absence of a fo rum at the international level for regular dialogue
among trade, finance and development Ministers.  There have been several examples of initiatives
that have been taken in this regard.  One was the support of the IMF Managing Director and the
President of the World Bank for the Director-General’s initiative, announced at the G-7 Summit in
Lyon in 1996, for duty-free and quota-free access for exports from LDCs.  Another was contacts
between the Director-General, the Managing Director  of the IMF and key government officials during
the financial crisis in emerging markets in the late-1990s, to ensure that its effects did not provoke a
rash of new trade restrictions by the countries involved or their trading partners.
63. The IMF Managing Director and the President of the World Bank have responded willingly to
requests from the Director-General for help in seeking the support of finance and development
ministers for advancing various aspects of the multilateral trade agenda, and they have issued anumber of joint statements to that effect.  In 1997-98 they focused on addressing developing
countries' trade-related needs, including through the Integrated Framework.  In 1999 and 2001, it was
on the value of new trade negotiations in contributing to stronger economic growth, greater financial
stability, and improved development prospects.  Since 2002, emphasis has been placed on the
importance of political leadership from the major trading nations to move the Doha Round forward,
especially in agriculture.
E. C
OOPERATION AT THE STAFF LEVEL
64. Each organization has a focal point for staff cooperation, but in practice most substantive
cooperation takes place through direct contacts between operational staff.  This decentralized process
avoids bureaucracy and works well, both within and between organizations.  A recent initiative of the
Director-General and the President of the World Ba nk has been to establish a six-month, renewable
strategy for staff cooperation between the WTO and the World Bank.
                                                     
37 WT/GC/M/35, 30 March 1999.
38 Credit for autonomous trade liberalization; trade policy advice and conditionality of the IMF and
World Bank; surveillance of trade policies; cooperation in trade-related technical assistance and capacity-
building; IMF and World Bank lending in support of net food-importing developing countries; trade
preferences;  BOPs provisions of GATT 1994; Small Economies; IMF and World Bank support for tradenegotiations;  and the relationship between investment, capital account transactions, and the GATS(WT/GC/W/140).
39 WT/WGTDF/W/17, and M/4.
40 TN/CTD/3/Rev.1 and Rev.2 (African  Group), and TN/CTD/W/4 (LDCs).
41 WT/TF/COH/S/6 reports on matters discussed by the heads of the agencies in October 2002.WT/TF/COH/S/7
Page 15
65. Under the terms of the cooperation Agreements, IMF and World Bank staff have the right to
participate as observers in most WTO bodies.42  In that context, they are both awaiting observer status
in the TNC and its subsidiary bodies.
66. They each contribute actively to the work of WTO Councils, Committees and Working
Groups, on a statutory basis in the case of IMF participation in the Committee on Balance-of-Payments Restrictions, and otherwise on an ad hoc  basis in response to invitations from Members.  In
2002, this included contributions by the IMF and/or the World Bank to the Trade Policy Review
Body, accession Working Parties, the Committee on Trade and Development and its Sub-Committee
on LDCs, the Committee on Trade in Financial Services, the Working Groups on the Relationship
between Trade and Investment, on Trade, Debt and Finance, and on Trade and Transfer of
Technology, and WTO seminars on Capacity-Building and Standards, Customs Development,
Mainstreaming Trade, the IMF’s Financial Sector Assessment Programmes, and on tax/tariff revenue
re-balancing.
67. In addition, pursuant to agreements reached at the end of the Uruguay Round, IMF and World
Bank staff have reported regularly to the Committee on Agriculture on financial support they provide
to help least developed and net food-importing developing countries (NFIDCs) that experience short-
term difficulties in financing normal levels of commercial imports of basic foodstuffs.  Support isavailable through financial assistance for adjustment programmes or emergency lending in the case of
the IMF (including its CFF), and through agricultural development projects, structural adjustment
lending and emergency lending in the case of the World Bank.  IMF and World Bank staff
participated in the inter-agency panel that was set up after the Doha Ministerial Conference to explore
ways and means of improving the access of LDCs and NFIDCs to multilateral financing programmesand facilities in this area, and they have been invited to participate in the follow-up inter-agency
roundtable that will explore the need for a safety net for these countries during the reform process
leading to greater liberalization of trade in agriculture.
43
1. Technical assistance and training
68. The need for increased technical assistance to developing countries was identified in the
Singapore Ministerial Declaration in 1996, in r ecognition of the significant new Uruguay Round
commitments that they had undertaken and of the range and complexity of the efforts they were
making to comply with them.  By the time of th e Doha Ministerial Declaration in 2001, technical
assistance and training was seen as a central element of the development dimension of the multilateral
trading system, for implementing and adjusting to WTO obligations and participating effectively in
the Doha Work Programme.
69. The IMF and the World Bank have considerable experience and expertise to share in this
area, and their support is essential to augment the limited resources of the WTO.  They provide
support through their own country programmes and through collaborating in WTO technical
assistance activities.  The IMF provides demand-driven technical assistance primarily on fiscal and
customs reform.  The World Bank provides an extensive programme of technical assistance activities
at the country-level in a wide range of trade-related areas – from agriculture and services, to customsreform, standards, trade facilitation, and competition policy.
44
70. An early example of a valuable joint exercise between the WTO and the World Bank was a
1996-97 programme to assist 25 developing countries to draw up national schedules of commitments
                                                     
42 Except dispute settlement panels, the Dispute Settlement Body and the Committee on Budget and
Administration.
43 WT/GC/62.
44 Details are contained in "The World Bank’s Operational Trade Agenda", April 2003.WT/TF/COH/S/7
Page 16
on basic telecommunications for submission in the ongoing Services negotiations.  Most recently,
cooperation with, and funding from, the World Bank enabled the establishment in 2002 of the new
Standards and Trade Development Facility, to provide capacity-building and technical assistance in
developing and applying standards and regulations for food safety and animal and plant health.45  This
is now at the stage where donor agencies are invited to consider making financial contributions toincrease the resources available to meet the Facility’s ambitious objectives.  The World Bank is
committed to continuing to support WTO technical assistance activities under the Doha Work
Programme, and it contributes staff resources to implementation of the WTO’s Annual Technical
Assistance Plan.
71. In the area of training, close links have developed between the World Bank Institute and the
WTO Institute for Training and Technical Cooperation.  Since 1997, they have maintained a shared
website providing development-related trade information and a contact point for trade officials indeveloping and transition economies.  Consideration is being given to how the World Bank’s Global
Learning Network might be used in future by the WTO to expand its distance learning capacities.
World Bank staff participate regularly in WTO training courses for trade officials, and in the WTO’s
"Geneva Week" programme for non-resident missions.  In 2002, the World Bank made a substantial
financial contribution to two ad hoc  regional three-month training courses for African countries that
were organised by the WTO in Kenya and Morocco.  It is now working with the WTO Secretariat to
identify other training partners in other regions so as to build capacities to meet the growing demand.
72. The WTO Secretariat works closely with the IMF, the World Bank, other intergovernmental
organizations and the Austrian Government as co-sponsors of the Joint Vienna Institute (JVI), which
was established in 1992 to provide training support mainly for countries making the transition fromcentrally-planned to market-based economies.  The JVI provides applied economic policy courses,
where trade issues figure prominently, and the WTO organizes two trade policy courses annually.
Building on the success of its training activities, the JVI has become a permanent training institution
in 2003, and the Director-General is discussing with  the Managing Director of the IMF how best the
WTO's interest in being a permanent member can be accommodated.
2. Country-level policy analysis and the Trade Policy Review
73. Policy review and analysis at the individual country level is a core activity of the WTO, the
IMF and the World Bank.  Both the IMF and the World Bank pay considerable attention to trade
policies in this context, and as noted earlier the IMF Executive Board  has recently committed to
further deepen Fund surveillance in this area, especially with regard to industrial country policies that
have important spill-over effects on other countries.
74. In the WTO, the Trade Policy Review Mechanism (TPR) aims to enhance transparency and
understanding of the trade policies and practices of WTO Members through collective evaluation and
peer review.  An important, although largely undocumented, benefit for Members from preparing
their reports for the TPR has been greater coherence in economic policymaking at the national level,
by encouraging the involvement of other economic ministries in the exercise of explaining and
rationalising policies affecting trade.  Since 2000 the WTO Secretariat has also used the TPR processto help LDCs identify their technical assistance  needs and priorities, to guide the work of the
Integrated Framework process and to feed into their Poverty Reduction Strategy Papers.
46
75. From the outset the WTO Secretariat’s TPR reports have benefited from data and material
provided by the IMF, particularly in setting the macroeconomic background for the review of a
                                                     
45 In cooperation also with the FAO, WHO and international standard setting organizations.
46 To date this has been completed for Tanzania, Bangladesh, Mozambique, Uganda, Madagascar,
Malawi, Mauritania, Haiti, and Zambia.WT/TF/COH/S/7
Page 17
Member’s trade policies and its impact on the trading system.  When feasible, draft reports are
commented on by IMF and World Bank staff.  As the TPR process has expanded to cover a larger
number of WTO Members more frequently, the background reports and discussions in the TPRB have
produced increasingly useful input for the IMF and World Bank in preparing their country reports.
76. It has been suggested by a number of WTO Members that cooperation could be increased in
this area by promoting a more active role for the IMF and the World Bank in the TPRB discussions,
with the possible corollary of a more active role for the WTO Secretariat as regards trade aspects of
IMF Article IV consultations, particularly in view of the IMF’s increased attention to the surveillance
of the trade policies of its members.47
3. Research and data exchange
77. The exchange of views and information on trade and trade-related issues is an important
requirement for greater coherence in policy-making, and the three organizations draw extensively onthe work and expertise of each other.  All three have active programmes of research and analysis of
trade and trade policymaking, and collaboration in this area has intensified over time.  The World
Bank, in particular, has an extensive research programme on trade issues.
48  Drafts of relevant reports
are regularly shared and commented on before being issued to member governments.
78. Following discussions in 2002 between the Director-General and the IMF First Deputy
Managing-Director, IMF staff began preparing a series of papers on topics related to various aspects
of the Doha Work Programme.  To date, four papers have been received and circulated to Members.49
79. Periodically, the WTO Secretariat organises seminars in Geneva so that the results of IMF
and World Bank work on trade-related issues can be presented informally to WTO delegations.50  In
addition, the World Bank has regularly briefed WTO delegations on its annual report on GlobalEconomic Prospects for Developing Countries, which has had a strong trade focus since 2001.
51  The
Secretariat will continue to keep Members informed about major IMF and World Bank publications
dealing with trade issues.
80. As noted above, several WTO Councils and Committees have invited the IMF and the World
Bank to provide briefings on their work on trade-related issues.  When resources permit, the WTOSecretariat participates in IMF and World Bank seminars in Washington, to provide a WTO
perspective on trade-related issues.  The WTO Secretariat has also participated in two task forces
established by the World Bank – the World Bank/Commonwealth Secretariat Task Force on Small
States, and the International Task Force on Commodity Risk Management in Developing Countries
which explored new, market-based approaches to as sist developing countries to better manage their
vulnerability to commodity price fluctuations.
52
81. Data exchange is also important.  Under the terms of a new dissemination policy adopted by
the Committee on Market Access in June 2002, the IMF and the World Bank now have online access
                                                     
47 WT/GC/W/297, WT/GC/W/360 and WT/GC//W/391.
48 Details of the World Bank Development Economic s Research Group’s work on trade issues are
available on  http://www.worldbank.org/research/trade/newletter.htm
49 WT/TF/COH/S/13, 14, 15 and 16.
50 Examples of topics covered to date are regionalism, developing countries participation in trade
negotiations, trade in agriculture, trade in services , Special and Differential Treatment, small economies, and
modalities for market access negotiations.
51 The GEP for this year (GEP 2004) is entitled "Realising the Development Promise of Doha".  It will
be distributed prior to the Cancún Ministerial Conference.
52 The Task Force's report  "Dealing with Commodity Price Volatility in Developing Countries:  A
Proposed for a Market-Based Approach", was published in September 1999.WT/TF/COH/S/7
Page 18
to the Integrated Database and to final schedu les of commitments of WTO Members.  The World
Bank, in partnership with UNCTAD, has developed software to analyse tariff and trade data for use in
market access negotiations, which is used by the WTO Secretariat and is also offered to WTO
Members free of charge.WT/TF/COH/S/7
Page 19
ANNEX 1
ORIGINS AND AIMS OF THE MARRAKESH COHERENCE MANDATE
1. The Uruguay Round was launched in 1986 amidst concern that the multilateral trading system
was failing to provide the stable, predictable and liberal market access that was expected of it.  While
the Round’s main objectives were clearly commercial – to halt and reverse protectionism and toliberalise and expand world trade – it aimed also to increase the relevance and contribution of trade
policymaking to broader economic goals.  International trade was under-performing in its role of
boosting economic growth and development, and an accumulation of poor trade policymaking was
aggravating structural economic adjustment problems in developed and developing countries.
2. Restoring the effectiveness of the trading system was not a task that could be accomplished
entirely from within.  While open markets and strong  rules are crucial, trade growth depends also on a
well-functioning international monetary and financial system and on developing countries being ableto secure a sufficient and reliable flow of investment resources to expand their exports and imports.
3. Several problems were weighing on trade and trade policies at the time:  volatile exchange
rates were perceived to be raising the costs and uncertainties of trade and discouraging governments
from abandoning quantitative trade restrictions and lowering tariffs
53;  large and persistent current
account imbalances that were generating protectionist pressures;  low and volatile commodity prices;and debt problems of developing countries, particularly in Latin America.  The last of these was
viewed by some as a clear example of "incoherence" in global economic policymaking.  Indebted
developing countries were struggling to meet their financial obligations at the same time that market
access barriers in their main trading partners (and main creditors) were impeding their ability to earn
foreign exchange.  The result was the prolongation of their debt crisis and contraction of their importsbecause of shortages of foreign exchange, wh ich in turn compromised their future export
performance, depressed domestic investment, and slowed their economic growth and development.
4. The implication was that while trade liberalization could be an engine for growth,
complementary and supportive policies were needed elsewhere.  The Punta del Este mandate
recognized this
54, and called for concurrent cooperative action at the national and international levels,
to strengthen the inter-relatio nship between trade policies and other economic policies affecting
growth and development, to contribute to improving the functioning of the international monetary
system, and to increase the flow of financial and real investment resources to developing countries.55
In addition, the Uruguay Round included negotiations "to increase the contribution of the GATT toachieving greater coherence in global economic policy-making by strengthening relationships with
other international organizations responsible for monetary and financial matters".
56
5. In the course of the negotiations, key links between trade, finance and development policies
were identified where coherence was felt to be particularly important but, in the view of some,
lacking.  They were market access and debt servicing; market access and trade-related structural
adjustment lending by international financial institutions; exchange rates and trade liberalization; and
the inappropriate use of trade restrictions for macroeconomic purposes.
                                                     
53Shortly before the Uruguay Round was launched, the GATT Contracting Parties debated the effects
of exchange rate volatility on world trade on the basis of a report they requested from the IMF.  IMF, "Exchange
Rate Volatility and World Trade" Occasional Paper 28, Washington D.C. July 1984.
54 Preamble to the Punta del Este mandate:  "Mindful of the negative effects of prolonged financial and
monetary instability in the world economy, the indebtedness of a large number of less-developed contractingparties and considering the linkage between trade, money, finance and development", 20 September 1986.
55 Punta del Este Mandate, Part A, "Objectives".
56 Punta del Este Mandate, Part E, "Functioning of the GATT System".  Reports on meetings of this
Negotiating Group are contained in MTN/GNG/NG/14/-.WT/TF/COH/S/7
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6. In addition, areas were identified where it was felt that institutional cooperation could
usefully be enhanced.  These were credit in WTO negotiations for autonomous trade liberalization,
including liberalization undertaken in the context of IMF/World Bank programmes;  assurance for
developing countries of technical and financial support from the IMF and World Bank for transitional
adjustment costs arising out of their trade liberalization and reform process;  the importance ofIMF/World Bank policy advice being WTO-consistent;  and more generally, cooperation between the
WTO, IMF and World Bank to assist member countries to ensure that their economic policies were
coherent at the national level.
57
7. The negotiations resulted in the Marrakesh Ministerial Declaration on Coherence, which drew
three conclusions.
8. One was that resolving problems of policy incoherence must start at home:  "The task of
achieving harmony between … policies falls primarily on governments at the national level".  Theproblems cannot be resolved directly through any actions that can be taken by international
organizations.  However, encouraging a more coherent approach to policymaking at the international
level, by the membership and staff of the WTO, IMF and World Bank, can make a valuable
contribution to increasing policy effectiveness at the national level.
9. The second was that "Trade liberalization … often involv[es] significant transitional social
costs".  In this connection, Ministers noted the role of the World Bank and the IMF in supporting
adjustment to trade liberalization, including support to net food-importing developing countries facing
short-term costs arising from agricultural trade reform.
10. The third conclusion was that the creation of the Trade Policy Review Mechanism, along with
placing the WTO on a permanent institutional footing and agreeing to hold regular WTO MinisterialConferences, would strengthen the WTO’s capacity to articulate a proper role for trade policy in the
broader context of global economic policymaking, and allow it to cooperate on more equal and
substantive terms with the IMF and the World Bank in the area of policy analysis and prescription.
This, it was felt, would allow trade-related issues of policy coherence to be brought more readily to
the attention of finance and development officials so as to encourage cross-cutting policy cooperation.It would also contribute to increased transparency and public awareness of the costs of protectionist
trade policies, and help encourage the IMF and World Bank to frame their trade policy advice
consistently with WTO obligations.
11. The Coherence Declaration called for the WTO to develop its cooperation with the IMF and
the World Bank, with the aim of each institution following consistent and mutually supportive
policies.  It was agreed that cooperation should respect the mandate, confidentiality requirements and
autonomy in decision-making procedures of each institution, and avoid the imposition ongovernments of cross-conditionality or additional cond itions.  In that spirit, the Director-General was
invited to review with the IMF Managing Director and the President of the World Bank the forms
cooperation might take.
12. In 1996, formal cooperation Agreements were agreed with the IMF and the World Bank, and
approved by the General Council
58 and the Executive Boards of the IMF and the World Bank.  The
Agreements provide for closer cooperation at the staff level, under the responsibility of the agency
heads, through staff participation in relevant official meetings, exchange of data, reports and
documents, and regular staff contacts, including when advice on WTO and IMF rules, or IMF and
World Bank policies, is needed.  Due to the statutor y nature of the relationship that exists between the
                                                     
57 The Director-General reported to the Negotiating Group in 1989 on his consultations with the heads
of the IMF and World Bank on how institutiona l cooperation might be enhanced: MTN.GNG/NG14/W/35.
58 WT/L/194 and Add.1 and WT/L/195.WT/TF/COH/S/7
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WTO and the IMF, the Agreement with the IMF prov ides also for the WTO to be kept informed of
IMF decisions approving the use of exchange arrangements and exchange restrictions59, for IMF
participation in the Committee on Balance-of-Payments Restrictions, and for each organization to
formally submit its views on matters of mutual interest to the other as part of the official record.
1994 WTO MINISTERIAL DECLARATION ON THE CONTRIBUTION OF
THE WORLD TRADE ORGANIZATION TO ACHIEVING
GREATER COHERENCE IN GLOBAL
ECONOMIC POLICYMAKING
1. Ministers recognize  that the globalization of the world economy has led to ever-growing
interactions between the economic policies pursued by individual countries, including interactions
between the structural, macroeconomic, trade, financial and development aspects of economic
policymaking.  The task of achieving harmony between these policies falls primarily on governments
at the national level, but their coherence internationally is an important and valuable element inincreasing the effectiveness of these policies at national level.  The Agreements reached in the
Uruguay Round show that all the participating gove rnments recognize the contribution that liberal
trading policies can make to the healthy growth and development of their own economies and of the
world economy as a whole.
2. Successful cooperation in each area of economic policy contributes to progress in other areas.
Greater exchange rate stability, based on more orderly underlying economic and financial conditions,
should contribute towards the expansion of trade, sustainable growth and development, and the
correction of external imbalances.  There is also a need for an adequate and timely flow of
concessional and non-concessional financial and real investment resources to developing countriesand for further efforts to address debt problems, to help ensure economic growth and development.
Trade liberalization forms an increasingly important component in the success of the adjustment
programmes that many countries are undertaking, often involving significant transitional social costs.
In this connection, Ministers note the role of the World Bank and the IMF in supporting adjustment to
trade liberalization, including support to net food-importing developing countries facing short-term
costs arising from agricultural trade reforms.
3. The positive outcome of the Uruguay Round is a major contribution towards more coherent
and complementary international economic policies.  The results of the Uruguay Round ensure an
expansion of market access to the benefit of all countries, as well as a framework of strengthened
multilateral disciplines for trade.  They also guarantee that trade policy will be conducted in a more
transparent manner and with greater awareness of the benefits for domestic competitiveness of anopen trading environment.  The strengthened multilateral trading system emerging from the Uruguay
Round has the capacity to provide an improved forum for liberalization, to contribute to more
effective surveillance, and to ensure strict observance of multilaterally agreed rules and disciplines.
These improvements mean that trade policy can in th e future play a more substantial role in ensuring
the coherence of global economic policymaking.
4. Ministers recognize , however, that difficulties the origins of which lie outside the trade field
cannot be redressed through measures taken in the trade field alone.  This underscores the importance
of efforts to improve other elements of global economic policymaking to complement the effective
implementation of the results achieved in the Uruguay Round.
                                                     
59 These decisions are circulated to WTO Members (WT/TF/IMF/-).WT/TF/COH/S/7
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5. The interlinkages between the different aspects of economic policy require that the
international institutions with responsibilities in  each of these areas follow consistent and mutually
supportive policies.  The World Trade Organization should therefore pursue and develop cooperation
with the international organizations responsible for monetary and financial matters, while respecting
the mandate, the confidentiality requirements and the necessary autonomy in decision-makingprocedures of each institution, and avoiding the imposition on governments of cross-conditionality or
additional conditions.  Ministers further invite the Director-General of the WTO to review with the
Managing Director of the International Monetary Fund and the President of the World Bank, the
implications of the WTO's responsibilities for its cooperation with the Bretton Woods institutions, as
well as the forms such cooperation might take, with a view to achieving greater coherence in global
economic policymaking.
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