RESTRICTEDWORLD TRADE
ORGANIZATIONWT/WGTDF/W/15
29 October 2002
(02-5947)
REPORT (2002) OF THE WORKING GROUP ON TRADE, DEBT AND FINANCE
TO THE GENERAL COUNCIL
Draft
I. INTRODUCTION
1. The Working Group on Trade, Debt and Finance was established at the 4th Ministerial
Session in Doha in November 2001, with the following mandate1:
"We agree to an examination, in a Working Group under the auspices of the General Council,
on the relationship between trade, debt and financ e, and of any possible recommendations on steps
that might be taken within the mandate and competence of the WTO to enhance the capacity of the
multilateral trading system to contribute to a durabl e solution to the problem of external indebtedness
of developing and least-developed countries, and to strengthen the coherence of international trade
and financial policies, with a view to safeguarding the multilateral trading system from the effects of
financial and monetary instability.  The General Council shall report to the Fifth Session of theMinisterial Conference on progress in the examination".
II. INFORMATION ON THE GROUP'S ACTIVITIES
2. The Working Group has held three meetings, on 15 April, 11-12 July, and 30 September,
under the Chairmanship of Ambassador Hernando José Gómez of Colombia.
2
3. At its meeting on 11-12 July, the Working Group adopted its Work Programme for 2002
contained in WT/WGTDF/W/1/Rev.1 (reproduced in Annex I of this document), and agreed that it
would focus on the issue of “The Relationship between  Trade and Finance” at its July meeting, “The
Relationship between Trade and Debt” at its Sept ember meeting, and “Towards Greater Coherence”
at its December meeting.
4. It was agreed that all regular observer organizations to the General Council be granted
observer status in the Working Group (the FAO, IMF, ITC, OECD, UN, UNCTAD, WIPO and the
World Bank).  In addition, it was agreed to invite representatives of relevant intergovernmentalorganizations exercising responsibilities in areas covered by the Work Programme to provide brief,
factual presentations describing their work and experience on the issues under examination.
5. A list of the working documents prepared for the Group is contained in Annex II.
A. T
HE RELATIONSHIP BETWEEN TRADE AND FINANCE
6. At the Group's first meeting (April), a representa tive of the IMF presented an overview of the
IMF's work on the reform of the financial architecture.  He noted that the major building blocks of its
                                                     
1 Paragraph 36 of WT/MIN/(01)/DEC/W/1.
2 Reports on these meetings can be found in WT/WGTDF/M/1, M/2 and M/3.WT/WGTDF/W/15
Page 2
work encompassed transparency and accountability, the strengthening of financial systems,
strengthened external vulnerability analysis, and standards and codes.
7. The Chairman noted the IMF’s view that participation in its financial sector assessment
programme, together with the design and implemen tation of prudential standards, could help WTO
Members assess their readiness to benefit from opening their financial services sectors.  The standardsinitiative, pursued by the IMF and the World Bank, focussed on the development of internationally-
agreed standards and codes to promote strong institutional underpinnings for a stable international
financial system.  The IMF had also stated that the adoption of standards and codes of good practice
contributed to the effective functioning of markets and created an enabling environment conducive to
investment and trade.  Furthermore, Members ha d suggested that the Working Group should examine
a number of issues:  exchange rates and their effect on competitiveness;  how the present financial
architecture responded to the financial needs of developing countries;  and how trade-financingfacilities could be strengthened and made more secure.
8. At the second meeting (July), representative s of UNCTAD, the Asian Development Bank,
and the OECD made presentations based on their wr itten submissions (Annex II).  In the ensuing
discussion, a variety of issues was raised, inter alia  exchange rate volatility and trade, the role of trade
and trade liberalisation in periods of financial crisis, the sequencing of trade and financial policyreform, difficulties in securing trade-financing, fiscal reform and tariff liberalisation, and the use of
trade restrictions for balance-of-payments purposes.
9. In summing up the discussions on the relationship between trade and finance on his own
responsibility, the Chairman drew attention to the following themes:
• The value of the WTO system in providing stability and economic security in periods
of financial crisis;
• the value of keeping markets open world-wide in periods of financial crisis, so as to
ensure that crisis-hit economies are able to continue to count on exports for foreignexchange earnings and a source of income growth;
• the role of trade liberalization in resource allocation and the resilience of economies
to external shocks;
• the relationship between the exercise being carried out by the IMF and World Bank to
strengthen financial systems, and the negotiations being carried out by the WTO on
financial services;  and
• based on experience gained in Asia, the need to improve the stability and security of
sources of trade-financing, especially to help deal with periods of financial crisis.
B. T
HE RELATIONSHIP BETWEEN TRADE AND DEBT
10. At the third meeting (September) presentations were made by representatives of the United
Nations Economic Commission for Latin America and the Caribbean, the United Nations Economic
Commission for Africa, and the World Bank on the basis of their written submissions (Annex II).  In
the ensuing discussion, a variety of issues was raised, inter alia  the importance of export market
access for indebted developing countries, problems linked to deterioration in the terms of trade, and
the importance of alternative sources of foreign finance for developing countries (such as FDI).
11. In summing up the discussions on the relationship between trade and debt on his own
responsibility, the Chairman drew attention to the following themes:
• Overseas market-access restrictions impeded the ability of indebted countries to earn
the foreign exchange that they need to serv ice their external debt and avoid resort to
further unsustainable borrowing.  Relevant studies suggested that the gains that couldWT/WGTDF/W/15
Page 3
be derived from eliminating barriers on these countries’ exports far outweighed the
annual flows they received of ODA and debt relief – flows that the U.N. Conference
on Financing for Development in Monterrey had pledged to increase;
• A global, non-discriminatory reduction of trade barriers in the context of the current
WTO negotiations, especially in areas where distortions affect developing countries'
exports, could make a significant contribution to a durable solution to the problem of
external indebtedness of developing and least-developed countries;
• At the same time, indebted countries could improve the debt servicing capacity of
their economies by properly liberalizing their own trade regimes. This could help
boost their domestic growth, productivity and exports.  Careful consideration needed
to be given to the timing and sequencing of trade reform in this context, as well as to
the cost of adjustment involved in such liberalization and the assistance needed to
meet these costs;
• Trade policy reform in indebted countries needed to be supported by pro-growth
policies that would involve, inter alia , raising domestic private savings and
encouraging foreign direct investment;
• Further examination of the issue of the deterioration of the terms of trade was needed,
as it affected the capacity of countries, despite notable domestic reforms underway, toservice their debt and move away from commodity exports.
12. Also at this meeting (September), the Group discussed a written submission from the
European Community (WT/WGTDF/W/8), containing a number of ideas on the process of theWorking Group, proposals on how to move to a more substantive phase of its work, and suggestions
of concrete areas for improved Coherence be tween the WTO and other international fora.WT/WGTDF/W/15
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Annex I
DRAFT WORK PROGRAMME 2002
I. THE RELATIONSHIP BETWEEN TRADE AND FINANCE
A. FINANCIAL ARCHITECTURE AND TRADE
B. TRADE POLICY AND FINANCIAL STABILITY
C. ANY RELEVANT WTO P ROVISIONS
D. OTHER TOPICS RAISED BY MEMBERS
II. THE RELATIONSHIP BETWEEN TRADE AND DEBT
A. EXTERNAL DEBT AND TRADE
B. TRADE -RELATED ISSUES AND ALLEVIATION OF THE EXTERNAL INDEBTEDNESS OF
DEVELOPING AND LEAST -DEVELOPED COUNTRIES
C. ANY RELEVANT WTO P ROVISIONS
D. OTHER TOPICS RAISED BY MEMBERS
III. TOWARDS GREATER COHERENCE
A. ASSESSMENT OF WORK IN PROGRESS
B. ORIENTATION OF FUTURE WORKWT/WGTDF/W/15
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Annex II
Summary of contributions received in the Working Group
on Trade, Debt and Finance in 2002
Symbol
(WT/WGTDF/W/-)Member / Other
sourceWhere introduced
(Reference in Minutes)Title or Topic
W/1/Rev.1 M/2, Para. 2 Draft Work Programme 2002
W/2 IMF M/1, Para. 9 IMF Conditionality
W/3 Secretariat M/2, Para. 43 WTO Provisions Relevant to the
Relationship between Trade andFinance and Trade and Debt
W/4 Secretariat M/2, Para. 22 The Relationship between Trade and
Finance – A Review of SelectedLiterature Related to Financial Crises
in the 1990s
W/5/Rev.1 UNCTAD M/2, Para. 6 The Effects of Financial Instability and
Commodity Price Volatility on Trade,Finance and Development
W/6 Asian Development
BankM/2, Para. 36 Need for Cost-effective and Reliable
Trade Finance
W/7 + Add.1 OECD M/2, Para. 25 Financial Crisis:  Implications for
Trade and Trade Policy
W/8 European
Community and
member StatesM/2, Para. 20
M/3, Para. 47Methodological Framework for the
Working Group – Issues for
Consideration and Study
W/9 Secretariat M/3, Para. 3 The Relationship between Trade and
Debt – A Review of Selected Literature
W/10 ECLAC M/3, Para. 5 Mechanisms to Deal with Debt
Overhang
W/11 Economic
Commission forAfricaM/3, Para. 22 The Links between Trade and Debt:
The African Experience
W/12 + Add.1 World Bank M/3, Para. 33 Debt Relief for Sustainable
Development
W/13 IMF M/3, Para. 46 World Economic Outlook – September
2002:   Essays on Trade and Finance
and Trade and Financial Integration
Summary
W/14 IMF / World Bank M/3, Para. 40 Market Access for Developing Country
Exports – Selected Issues:   Paper
Prepared Jointly by the Staff of theInternational Monetary Fund and theWorld Bank
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