WORLD TRADE
ORGANIZATIONWT/COMTD/30
2 May 2001
(01-2248)
Committee on Trade and Development
WTO MEMBERSHIP CONTRIBUTION TO
THE INTERNATIONAL CONFERENCE ON FINANCING
FOR DEVELOPMENT PREPARATORY COMMITTEE
I. THE CONTRIBUTION OF TRADE TO FINANCING FOR DEVELOPMENT
1. The World Trade Organization, consisting of 140 Members, is pleased to be actively involved
as a major institutional stakeholder in the preparatory process for the forthcoming International
Conference on Financing For Development and to make an input from the perspective of the
membership of the Organization.  The WTO has and will maintain a deep interest in this issue,
especially given that eighty per cent of its growing membership comprises developing countries.
2. The WTO is the forum for negotiating multilateral trade liberalization and rules and the
guarantor of these rules through monitoring, surveillance and dispute settlement.  It contributes to
enhancing financing for development through the dynamic linkages between trade, investment,
growth and development.
3. The WTO membership welcomes the statement made in paragraph 14 of the
Secretary-General's Report that trade policy is one of the foremost policies affecting the developmentprospects of developing countries.  We also agree with the statement in the same paragraph that the
potential impact of expanding market access can be many times greater than direct financial
assistance, provided that it is combined with successful efforts to increase and diversify developing
countries' productive capacity.
4. There are strong and significant linkages between trade and financing for development.
These come through the role that trade can play in mobilizing domestic resources and generating
foreign exchange earnings, and the role of trade liberalisation in promoting economic growth through
increased efficiency and the removal of distortions.
5. In the Preamble to the Marrakesh Agreement establishing the WTO, Members recognized that
"their relations in the field of trade and economic endeavour should be conducted with a view to
raising standards of living, ensuring full employmen t and a large and steadily growing volume of real
income and effective demand, and expanding the production of and trade in goods and services, whileallowing for the optimal use of the world’s resource s in accordance with the objective of sustainable
development, seeking both to protect and preserve the environment and to enhance the means for
doing so in a manner consistent with their respective needs and concerns at different levels of
economic development."
6. All WTO Members recognize the value of open trade policies as a critical element of a policy
framework which can contribute to growth and assist in poverty alleviation.  However, it is recognised
that the linkages between trade liberalization, economic growth, development and poverty alleviation
are complex.  It is also recognized that some developing countries, including the least developed
among them, face serious challenges in meeting the short- to medium-term adjustment costs of trade
liberalization, including employment and fiscal costs, and that appropriate support policies andcompensatory measures may be required.  Open trade policies can play a significant role inWT/COMTD/30
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encouraging inflows of foreign investment in both goods and services.  In this regard, while overall
flows of foreign direct investment to developing c ountries have been growing, not all such countries
have benefited equally.
7. The principles of non-discrimination (as applied through the MFN and national treatment
clauses), predictability (through binding commitments), transparency, equity and provisions forspecial and differential treatment are fundamental to a trading environment conducive to growth and
development.  The Marrakesh Agreement, to which all our Members subscribe, recognizes that "there
is need for positive efforts designed to ensure that developing countries, and especially the least
developed among them, secure a share in the growth in international trade commensurate with the
needs of their economic development."  At their meeting in Geneva in May 1998, WTO Ministers
also expressed their deep concern "over the marginalization of least-developed countries and certain
small economies, and recognize the urgent need to address this issue which has been compounded bythe chronic foreign debt problem facing many of them".
8. The WTO is not a development finance organisation and currently has the capability to
provide only limited funding for technical assistance to Members through its regular budget and Trust
Funds.  Although the contribution made by WTO Members both through the WTO Secretariat and
directly for trade policy training and technical assistance is important, many Members consider thatthere is a pressing need to better co-ordinate and increase the trade-related technical assistance
available to developing countries, whether through the Organization’s budget, the Trust Fund, other
multilateral donors, or bilaterally.
II. TRADE LIBERALISATION, TRADE POLICY REFORM AND GROWTH IN
NATIONAL INCOME, DOMESTIC CAPITAL FORMATION AND THE
GENERATION OF FOREIGN EXCHANGE
9. By trade liberalisation and policy reform, we refer both to the lowering of trade barriers,
leading to improved market access in all sectors, and to the elaboration of balanced and equitable
rules for the conduct of international trade in goods and services.  Lower tariffs and trade facilitationare elements  conducive to encouraging foreign and domestic investment alike, as inputs become
cheaper and production can become more competitive.  In addition, liberalisation can help reduce the
anti-export bias of import protection, as the resulting increase in  import demand puts downward
pressure on the exchange rate, making exports more competitive on international markets.
10. However, the highly variable trade performance of a large number of developing countries,
and in particular the falling share of the LDCs as  a group, indicates that strengthened performance and
increased competiveness of developing countri es' production are dependent on a number of other
elements, notably stable macroeconomic policies, measures to address supply side constraints,
attention to infrastructure and human resource development, the resolution of debt problems, and
access to technology.  More account thus needs to be taken of the cross-linkages among trade,
macroeconomic policies, such as fiscal, monetary and exchange rate policies, and structural or
micro-economic policies.
(a) Trade in Goods
11. Improved market access for goods in certain critical areas is crucial to many developing
countries.  Generally, average tariff rates on manufactures are low to moderate, and binding coverage,
particularly in developed countries, is high.  However, many Members consider that reduction of high
tariffs, tariff peaks and tariff escalation would benefit a number of areas of export interest todeveloping countries, including, for example, in textiles and clothing, where in addition the main
liberalisation agreed in the Uruguay Round has yet to take place.  Members consider that marketWT/COMTD/30
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access would also be enhanced through tariff reductions in agriculture, including in specific and
mixed duties, and the reduction of domestic supports and export subsidies, which is also part of the
ongoing reform process1.  Non-tariff measures relating, inter alia , to standards and quality continue to
be of deepening concern to many developing countries owing to their trade-restrictive effects,
including in sectors where tariffs may have been significantly reduced.  Some Members have alsoemphasized their concern about negative effects on development of contingent measures such as anti-
dumping and safeguards, as well as, in some cases, other unilateral measures.
12. In the past decade, many developing countries have made great strides in reducing their levels
of external protection.  The evidence suggests that liberalization has often contributed to faster growth
in trade and output.  However, there are questions about the appropriate pace and sequencing of
liberalization, and the scale of short-term adjustment costs.  Moreover, there is concern about the
effects of trade liberalization on the government revenues of trade revenue-dependent economies andthose with a large informal sector.  We emphasise that it would be a mistaken response to seek to halt
trade liberalisation.  The answer must be to draw upon the lessons of the past regarding pace,
sequencing, and the critical support measures that are required, so as to ensure that all developing
countries can, in the shortest time possible, join the ranks of efficient and expanding trading
economies.
13. Against this background, we would draw attention to the room for further trade liberalization,
especially where high average nominal tariffs still prevail.  Cutting tariffs and locking-in such cuts
through binding commitments in the WTO would not only help the domestic economies of the
countries undertaking liberalization, but could also benefit all suppliers, including developing
countries.  At the same time, some developing Members consider that there is an ongoing need forflexibility in their trade policies.  Finally, there is  recognition that appropriate credit for autonomous
liberalization should be given in multilateral negotiations.
14. It is particularly important that market access for the least-developed countries be improved
significantly, and speedily, while avoiding distortions to the trade of other developing countries.  This
is part of the necessary process of "mainstreaming" trade into development for these countries.  In this
context, recent market access initiatives announced in favour of least-developed countries by both
developed and developing trading partners are very welcome.
(b) Trade in Services
15. The GATS negotiations offer opportunities for developing countries.  They stand to gain from
enhanced market access in sectors and modes of supply in areas of services where they have a
comparative advantage.  Many developing countries recognize the value of opening up their services
sectors and of making commitments under the GATS in order to attract foreign investment in areascritical for development.  The GATS provides the multilateral framework for sequenced and flexible
liberalisation of services trade and improvement of supply conditions in services sectors, consistent
with development needs.  Moreover, due to the in frastructural role of many services, the more a
country's manufactures have access to competitively priced services, the more competitive will its
exports be on world markets.  The mechanism of scheduling binding commitments provides a meansto lock-in policy reforms.  In accordance with the gu idelines for the mandated negotiations in service,
account shall be taken and credit shall be given in the negotiations for autonomous liberalization
undertaken by Members since previous negotiations.  In services, as in goods, WTO rules improve the
transparency, predictability and stability of the environment in which economic agents operate.  This
in turn is critical for encouraging both domestic and foreign private sector investment.  In this
                                                     
1 See Article 20 of the WTO Agreement on Agriculture for the precise negotiating mandate, including
issues to be taken into account.WT/COMTD/30
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connection some Members have expressed concern about measures to counter "unfair" fiscal
competition.
III. NEED FOR EQUITABLE AND BALANCED INTERNATIONAL RULES
16. The Marrakesh Agreement was a major landmark in reforming international trade rules and
contributing to the continuing growth of world trade.  Nevertheless, since 1995, there has been a
decline in the share in world trade of LDCs as a group, and many WTO Members, particularly
developing economies, have experienced difficulties, including high administrative and financial costs
in implementing the Uruguay Round Agreements.  Thus, some Members consider that the distribution
of gains from the WTO Agreements has been uneven.  This concern is recognized and these
difficulties are being addressed in an ongoing process.  Efforts are also being made to build the
capacity in least-developed and other developing countries to enable them to take fuller advantage oftrading opportunities and the WTO agreements.
17. A number of WTO Members consider that there are imbalances in the WTO Agreements
which need to be re-visited , and that there are areas in the WTO agreements in which more work is
required to ensure that the widest distribution of benefits is shared by the greatest number of
countries, including in agriculture, services, contingency measures, standards, TRIPS, TRIMs, andtextiles and clothing.  A number also believe that the existing Agreements should be complemented
and strengthened in areas such as trade facilitation and rules, and that new issues such as competition
and investment which are now at the analytical stage should be included.
IV. RELATIONSHIP BETWEEN REGIONAL AND MULTILATERAL TRADE
LIBERALIZATION
18. WTO Members recognize that regional agreements and other free trade arrangements among
Members can contribute to the development of trade and the coherence of the trading system as a
whole, provided they are consistent with the rules and principles of the WTO, which seek to prevent
increased discrimination against non-Members and trade diversion.  Regional agreements arebecoming an increasingly important factor in international trade relations.
V. COHERENCE AMONG TRADE AND OTHER COMPONENTS OF FINANCING
FOR DEVELOPMENT
19. Effective development policies require measures in trade and other fields to be integrated in a
consistent and mutually reinforcing policy framework at national, regional and global levels.  The
evidence suggests that a number of interrelated and supportive measures are necessary by thecountries themselves, by bilateral donors and by international financial institutions.  The contribution
of trade to financing for development will be vastly enhanced through the mainstreaming of trade
policies into the wider framework of development and poverty reduction strategies.  This will be
facilitated through greater coherence among national governmental agencies, both in developing and
developed countries, and among international agencies in respect of trade and aid policies, includingthrough the Integrated Framework under the aegis of the WTO and its co-sponsoring agencies.
VI. CONCLUSION
20. The WTO membership is convinced that trade can make a strong contribution to financing for
development, and that strengthening the trade performance of all economies and, particularly,WT/COMTD/30
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developing countries can best be achieved through continued pursuit of an equitable, liberal and open
rules-based multilateral system.  This would comprise inter alia , open market access, measures to
encourage implementation and facilitate trade, addressing concerns relating to non-tariff measures and
appropriate design and implementation of provisions for special and differential treatment.  To
achieve this objective will require a range of mutually supportive and inter-related measures andpolicies aimed at enhancing the supply capability, competitiveness and diversity of developing
countries’ trade in both goods and services.  A real value of strengthened trade performance in
enhancing financing for development is that, when supported by structural improvements in
productive capacity and predictable market conditions, the income flows generated will be sustainable
over the longer term and will tend to be less volatile than other sources of foreign exchange earnings.
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