RESTRICTED  WORLD TRADE  
ORGANIZATION  WT/WGTDF/M/9 
28 January 2005 
 (05-0368) 
Working Group on Trade, Debt and Finance  
  
REPORT OF THE MEETING OF 10 DECEMBER 2004 
 
1. The Working Group on Trade, Debt and Finance held its ninth meeting  on 10 December  
2004 under the Chairmanship of Ambassador Péter Balás (Hungary).  The Working Group adopted 
the agenda contained in WTO/AIR/2456. 
I. BETTER COHERENCE IN THE DESIGN AND IMPLEMENTATION OF TRADE-
RELATED REFORM AND MONITORING  
2. Under this topic, which constitutes part of the Working Group's work programme until the 
next Ministerial Conference, representatives of the UNCTAD Secretariat and the World Bank had been invited, at the request of  Members, to address the Group.  
A. P
RESENTATION BY UNCTAD1 
3. Referring to a recent UNCTAD paper on "Economic  Policy Challenges in an Open Economy:  
Coherence Between Trade and Finance"2, the representative of UNCTAD  noted that the reason why 
the UNCTAD Trade and Development Report had addressed the topic of coherence between trade and finance was because of  the fundamental changes in the global financial system that had had an 
important impact on the trading system.  More and more countries were copying the old Bretton 
Woods system and were pegging their exchange rate  typically to the US dollar as a way to avoid 
volatility.  Countries that had opened their econom ies were fighting for competitiveness, and the 
exchange rate was an important variable for its determination.  However,  the exchange rate was 
mainly determined by financial flows and determinan ts.  Starting with the premise that the exchange 
rate was fundamental for determining competitiveness, but was influenced by financial flows, he saw 
this as an incoherence between trade and finance.  While there was an international trading system, 
there was no multilateral financial system.  Indivi dual countries were now operating on a unilateral 
basis, in a sense copying the Bretton Woods system, but without multilateral rules.  One did not know whether these exchange rates were fixed at appropr iate levels, or whether they were undervalued or 
overvalued. Countries could find themselves  main taining undervalued exchange rates for long 
periods of time which could lead to misallocation.  
4. There had been dramatic falls during the As ian crisis after which exchange rates had 
recovered and some countries had then tried to stab ilize their currencies. Citing a number of country 
cases, it was clear that depreciation could lead to a short-term improvement in the trade balance, but 
that typically the situation retu rned to normal over time. The UNCTAD study had tested empirically 
the effects of exchange rate on trade and while not the dominant effect (since income flows were 
much more dominant) it demonstrated the huge swings in trade flows as the real exchange rate 
changed, and the effect that currency deprecia tion had on trade performance, particularly in 
Argentina.  Looking at the evidence on whether unde rvalued exchange rates led to permanent export 
improvement, the results were mixed.  India, for exam ple, had seen a dramatic fall in its exchange rate 
and its share in world markets had been rising.  Wh ile this was not the only reason – structural reform 
                                                     
 
1 The presentation by the UNCTAD representative wa s made available to Members at the meeting. 
2 WT/WGTDF/W/27. WT/WGTDF/M/9 
Page 2  
 
 was another leading cause – there was a strong correlation.  In Mexico, on the other hand, there was 
the paradox case where the real exchange rate had risen  but so had its market share.  In citing these 
examples, he wished to address the question of wh ether fixing the exchange rate was a successful 
strategy. 
5. UNCTAD had investigated where international investors would have placed their money.  
Based on the hypothesis that short-term financial fl ows were much more important in determining 
large movements in exchange rates than long-term fl ows as the former reacted to nominal rather than 
real rates of return money given interest rate di fferentials for short-term money.  In Central and 
Eastern Europe short-term investments were causing the currencies to appreciate, and this might have 
occurred in many developing countries in the past.  In Latin America, where restrictive monetary 
policies had been followed, the currency had been revalued far beyond the fundamentals. When it was 
clear that the situation was unsustainable, exchange markets had reacted and caused a lot of damage.  
A stable exchange rate and low interest rate differentials were positive for long-term foreign 
investment.  China, for example, and many other countries, were opting for this solution, but this 
solution was only advisable if an economy was str ong and expectations were to revalue and not 
devalue.  It was difficult for countries with open capital accounts to avoid cu rrency overvaluation and, 
as had been seen during the Asian crisis, even a gr eat deal of foreign exchange reserves could not 
prevent a speculative attack on a currency.  Unilatera l fixing did not allow for the right determination 
of the exchange rate in relation to fundamentals and there was an obvious need to balance exchange 
rate relations.  As long as there was no multilateral solution, the implications for trade flows were 
enormous;  trade relations could be permanen tly distorted by unrealistic exchange rates. 
6. The representative of the United States
 considered the view of the world financial system as 
presented in UNCTAD's paper to be somewhat distor ted and she noted that some aspects lay outside 
the mandate of the Working Group.  The Worki ng Group should not become involved in a discussion 
on exchange rates and take issue with the thrust of  a need for international adjustment as opposed to 
individual countries' balance-of-payments adjustme nt.  With respect to UNCTAD's conclusion that 
capital flows should be limited in high-inflation,  high-growth emerging economies, she argued that 
such controls would discourage foreign investment and raise the domestic cost of capital.  As such, 
controls were not good development tools.  In her delegation's view, one principle that had been 
drawn from the examination undertaken by the Wo rking Group was the primacy of pro-competitive 
policies and sound macroeconomic policies to ensure  debt sustainability and to limit the likelihood, 
length and severity of any financial disturbance.  As UNCTAD had indicated, it was not clear that 
exchange rates had not affected trade performance  but these were only one element.  Her delegation 
wished to make additional comments on the details of  the presentation and hoped, therefore, that there 
would be an opportunity to do so in the future.  
7. The representative of Switzerland  sought clarification as to whether the UNCTAD 
representative meant that a global arrangement w as absent or that the existing bodies were 
insufficient.   
8. The representative of Zambia wondered whether the United States could identify some 
positive points in UNCTAD's Presentation that coul d enhance the discussion in the Working Group. 
9. The representative of Canada  voiced the same concerns expressed by the United States 
regarding the need for some sort of new internationa l monetary system.  If one were to return to a 
system of fixed exchange rates this would require  the agreement of a large majority of countries 
which seemed neither realistic nor desirable.  A system based on fixed exchange rates would be 
unsustainable in the absence of wi despread stringent controls on capital flows.  In terms of 
determining the correct level of real exchange rates, he wondered how such a system would be 
determined, who would make such a determination and how the fate  of the Bretton Woods system 
could be avoided.  With regard to floating exch ange rates and their relationship to fundamentals,  WT/WGTDF/M/9 
 Page 3 
 
 
 while there had been deviations, his delegation believe d that these had in the long term been reflective 
of fundamentals.    
10. The representative of Brazil  referred to the recent meeting of UNCTAD XI in Sâo Paolo 
where support for UNCTAD's continued involvement  in macroeconomic policy issues had been 
raised.  Brazil considered that today's presentation confirmed the important role that UNCTAD could 
play in adding other perspectives on the internat ional financial system and coherence, and his 
delegation welcomed a varied approach to these is sues.  He had noted, from the presentation, that 
some countries had pegged their currencies to avoid th e fear of floating and wondered to what extent 
this was a good alternative given that this would be handing to others the management of one's 
exchange rate.  As for UNCTAD's policy conclu sions regarding alternative scenarios, be it a 
multilateral or a more unilateral system based on capital account controls, his delegation sought 
further elaboration on what the alternatives could be and how collective control over the financial 
system could be enhanced. 
11. The representative of Korea , like Canada and Switzerland, asked whether a movement was 
being considered at present to set up a new multilateral financial system. 
12. The representative of the European Communities  said that his delegation had found the 
UNCTAD paper stimulating and his delegation, too, asked for greater precision regarding the conclusion of putting an international monetary system in place and what the WTO contribution 
would be to such a system.  Clarification would help his delegation to understand the presentation in 
the context of the Group's mandate.  He understood th at the representative of UNCTAD had said that 
there was no strong correlation between increasing trade and monetary stability, yet there was strong 
evidence to the contrary that par ticipants in a monetary union had experienced a significant increase 
in trade. 
13. The representative of Nigeria
 noted that there was already a multilateral trading system but 
not a multilateral financial system and he asked for mo re details on how such a system could be set up 
and how it would operate.  For exam ple, it would be useful to have  some ideas on the mechanics of 
such a system.  He also asked the UNCTAD represen tative to explain how he viewed the role of the 
WTO in an international monetary system and how this would advance coherence.   
14. The representative of Japan  noted that the UNCTAD Trade and Development Report had 
been discussed at the 51st Trade and Development Board.  She noted that the choice of an exchange 
rate regime was a sovereign issu e and her delegation believed that each country should have the right 
to choose depending on its level of development.   
15. The representative of Kenya  said that for economies which f aced continuous budget deficits 
the situation described in the paper was pertinen t.  In cases where the Government was a major 
borrower, upward pressure was put on interest ra tes and countries might be forced to fix their 
exchange rate.  High interest rates would norma lly attract capital flows which would put upward 
pressure on the exchange rates which in turn woul d have adverse effects on exports.  Governments 
might also not have the resources to pursue other po licies to promote exports so that exchange rate 
adjustment would be an important factor in enha ncing competitiveness.  He as of the view that  
devaluing, or fixing the exchange rate at a lowe r rate, could boost exports assuming domestic capacity 
existed.  
16. The representative of China  found UNCTAD's presentation interesting and useful.  It 
strengthen coherence between financ ial and trade policies and was within the mandate of the Working 
Group in that it examined the effect the exchange  rate could have on trade.  In China's view, 
maintaining a stable exchange rate, as a way to su stain increased trade volumes, was in its interest. WT/WGTDF/M/9 
Page 4  
 
 17. The representative of Barbados
 raised the subject of small economies in the Caribbean that 
had adopted structural adjustment programmes, incl uding floating exchange rates, in the Eighties and 
early Nineties.  Barbados had decided to maintain  its US dollar peg, but those countries that had 
decided to float saw deterioration in the value of their currency although there had been some 
recovery primarily as a result of natural resources.  Barbados was primarily a service economy, and 
his delegation wondered whether natu ral resource endowment, or othe r factors such as land, could 
help determine what type of excha nge rate regime wa s appropriate.   
18. The representative of Chinese Taipei  thought the presentation was interesting as was 
evidenced by the fact that many Members had been stimulated to comment.  He echoed the sentiment 
that an exchange rate regime was a sovereign choice which was why it was not dealt with in the 
WTO.  He appreciated the value of limiting excha nge rate volatility and quoted from the Financial 
Times which had stated that "...persistent currenc y depreciation has never brought lasting prosperity 
to any nation in the world.  It is a theoretical c onstruct in search of a reality that does not exist."  
19. The Chairman  added that, in particular with resp ect to Central and Eastern European 
economies and the recent appreciation of their cu rrencies, what seemed to be missing from the 
analysis was the impact of domestic polic ies on countries' external  performance. 
20. The representative of UNCTAD , in responding to Members' questions, fully agreed that 
countries should follow sound macroeconomic policies, but pointed out that in some countries – in Latin America during the 1990s for example – good fundamentals had led to overconfidence, boosting 
capital inflows and counteracting the hoped for impact  of an anti-inflationary monetary policy.  
Reactions of exchange rate markets indicated that in an open economy one could not guarantee 
autonomy over what happened to one's economy.  Some Members had said that each country should 
choose its exchange rate regime but this was funda mentally impossible because exchange rates were a 
multilateral phenomenon.  At least one country had to leave its currency without intervention or a 
target.  At the present time, this was the United Stat es. Taking the example further, he suggested that 
if more countries were to peg unilaterally, then a ll countries would be subject to US monetary policy 
but the US would no longer have any control over its  own exchange rate.  He believed that the world 
was already in an alternative sy stem.  Compared to the 1990s when economists  envisioned the "two-
corner" solution, either fixed or floating,  there we re now very few cases of absolute pegging.  Either 
there was unilateral pegging or managed floating, th e latter allowing some flexibility in carrying out 
domestic monetary policy.   
21. He conceded that there was no easy solution and that he, too, was sceptical that there would 
be some sort of multilateral arrangement.  Yet, as far as he was concerned, the WTO came into the 
picture because financial flows had huge implications for the trading system.  If countries kept their exchange rate at a very low level then they had used such subsidization of their exports to be 
sustainable.  It was unavoidable that this had an e ffect on trade and needed to be addressed.  Exchange 
rates were not a random walk but we re determined by short-term interest rate arbitrage possibilities.  
This affected exchange rate movements and con sequently economic performance.  With respect to 
questions as to how an international monetary sy stem would be coordina ted, fundamentals would 
have to be monitored and compared in order to av oid over- or under-valuation.  He could not readily 
answer the question about natural resources endowment  and choice of exchange rate policy but, as 
mentioned, supply capacity could be used to manage  devaluations.  Typically countries reacted quite 
well to devaluations, mainly in countries producin g manufactures.  Addressing the query as to how to 
peg to an anchor when the anchor floats, he specu lated that if the dollar dropped dramatically against 
the euro, this would affect many countries in the do llar block.  He argued that the level of exchange 
rates, much more than volatility, was what impacted  trade flows and was central to the WTO.  He 
agreed that monetary union had a positive effect on trade and developing countries were trying to 
exploit that option.  In his view, it was not enough to reform or to reduce protection or to improve 
supply side capacity.  A country also needed the ri ght exchange rate system.  Many countries were  WT/WGTDF/M/9 
 Page 5 
 
 
 copying the European monetary arrangements but they could only do so under special circumstances 
because there was no multilateral arrangement.  He concurred with the quote from the Financial 
Times;  no one was recommending persistent devalua tion. In general, countries had devalued because 
their currencies had become overvalued and they could no longer compete on global markets.  A country should not devalue to promote competitiv eness, but once a currency was overvalued, its 
depreciation was necessary and could release previously  latent potential, as had recently been the case 
in Latin America.    
B. P
RESENTATION BY THE WORLD  BANK3 
22. The representative of the World Bank , Senior Advisor in Europe for International Trade, 
provided Members with information on supply-side  constraints and the ca pacities of developing 
countries to use opportunities to trade.  He firs t covered what the World Bank Group was actually 
doing in this area and then explained what Worl d Bank research showed about the relationship 
between trade, growth and poverty reduction.  Fina lly, he focused on supply-side constraints and how 
the Bank's research was contributing to capacity-building and trade facilitation.   
23. The Bank was the largest source of developmen t assistance aimed at poverty reduction.  In 
the last fiscal year, the Bank had provided $20.1 bil lion in loans and credits, focused on areas such as 
education and health, and was a major source of f unding in the battle against HIV/AIDs.  Together 
with the IMF it had launched a debt relief initia tive in 1996 which over time would amount to 
$53 billion.  The IBRD (International Bank for Rec onstruction and Developmen t) raised funds in 
international markets, maintaining a triple A rating.   In the previous fiscal year the IBRD had lent 
about $11 billion to some 37 countries.  In parallel,  the International Development Association (IDA) 
had provided grants of $9 billion to 62 countries.  
24. The Bank's main priorities were in the social ar ea, but these included aspects relevant to trade, 
such as improving access to services and infrastruct ure, supporting and encouraging private sector 
development and promoting reforms to create a st able economic environment.  Progress had been 
very uneven across the globe in terms of results in  the fight against poverty.  Life expectancy had 
increased in the last 30 years, although the scourge of  AIDs was reversing this trend, the number of 
literate adults had doubled and infant mortality rates had been reduced.  Extreme poverty had 
decreased significantly, even though in some parts of the world it had increased and there were still 
many challenges in terms of infrastructure and health.   
25. Briefly describing the current economic situation, he noted that 2004 had been a year of 
record world growth.  In the short-term, the do llar, the performance of the Chinese economy, and oil 
prices were important variables for the global economic situation.  Amongst developing countries, 
low-income oil-importing countries were particularly  sensitive to increases in  oil prices which would 
affect both national income and current account ba lances.  Middle-income countries, especially the 
highly-indebted, were more vulnerable to changes in interest rates.  
26. Bank research had shown a str ong relationship between integr ation with the world economy 
and growth.  Over the last 20 years, the world ec onomy had changed dramatically, particularly viewed 
from the perspective of developing countries.  In  emerging economies, such as Brazil, Mexico and 
Malaysia, and in low-income economies such as  China and India, the situation had changed 
significantly, not just in terms of the structure of  trade but also by the fact that these economies had 
become much more sophisticated in the value a dded they produced and in their exports.  These 
developments were due to a large extent to trad e reform.  He pointed out that, in many cases, the 
lowering of  tariffs was the result of unilateral lib eralization by developing countries.  Other factors 
accounting for the global change included the sh ift towards market-based economics, the exhaustion 
                                                      
3 The presentation by the World Bank representative was made available to Members at the meeting. WT/WGTDF/M/9 
Page 6  
 
 of the import-substitution model, economic crises whic h had at times provided the spark for change as 
well as the change, in the mind-set of the leadership in  the developing world.  He wished to stress that 
trade reforms, mainly on a unilateral basis, had driven this process.  
27. On the down side, some 43 – mostly low-income – countries had seen their share of world 
trade decline.  Admittedly, these countries would have been able to do better were it not for 
distortions in the world trading system, notably tariff peaks and non-tariff barriers, particularly in the 
area of agriculture.   
28. Turning to what the World Bank could do to a ddress supply-side constraints, he explained 
that the agenda spanned availability of physical  infrastructure, access to finance and reliable 
telecommunications, customs and trade facilitation,  trade promotion services, and institutional 
capacity.  The Bank had been doing a lot of research  on sanitary and phytosan itary requirements, not 
just those emanating from multilateral disciplines but also higher requirements that the private sector 
was increasingly applying.  These posed a problem for developing countries which might not have the capacity to meet these challenges.   
29. He recalled that in 2001, the International Trade Department had been restructured and now 
contained three sections:  an operational section resp onsible for financing;  a research section which 
provided inputs for advocacy work;  and a capacity -building section which included training by the 
World Bank Institute.  There was also a Trade Logi stics Group, including a small group specialized in 
customs, and trade-related operations had been st epped up.  He reminded Members that at Cancún, 
the Bank had announced that, first, it would engage in  a much broader programme in the area of trade 
facilitation and, secondly, it was ready to respond to eventual financing need s associated with the 
implementation of the results of the Doha Round.   
30. The Bank worked closely with the WTO S ecretariat, UNCTAD and the World Customs 
Organization in areas such as trade facilitation, and with the FAO on agricultural standards, and 
engaged in partnerships with the private sector.  There were a significant number of trade-related 
projects.  World Bank research showed that ope nness and integration with the world economy was a 
necessary, but not sufficient, cond ition in order to benefit in terms of either economic growth or 
poverty alleviation.  This was influenced by the dom estic regulatory and investment environment.  In 
an overly-regulated economy, e.g., where it took as mu ch as a year to establish a new company, there 
was a negative correlation between openness and gr owth because resources could be directed in the 
wrong way.  Another aspect was that liberalizatio n in services was very important in terms of 
promoting growth, particularly producer services, su ch as telecommunications, finance, and transport.  
There were still many restrictions in this area ar ound the world in developing countries.  The WTO 
process, by way of the GATS, offere d an opportunity to use multilate ral disciplines to advance this 
agenda of liberalization of services which was st rongly correlated with growth opportunities over the 
long-term.   
31. Trade facilitation was becoming more important;  as  border restrictions were lowered so ports 
and cargo clearance were increasingly significant.  In a Bank study examining 75 countries, it was 
found that bringing those countries that were below average efficiency up to the average would produce a dramatic increase in trade flows.  The trade facilitation agenda affected both imports and 
exports.  In the area of sanitary and phytosanitary re gulations, a careful analysis of costs and benefits 
and distributional aspects was very important in  assessing developing countries' capacity-building 
needs.  In Bank research it had been pointed out that higher standards had distributional impact 
because typically they were going to favour larger over smaller units and existing incumbents over 
new entrants.  The Bank was working with the WTO and FAO within the Standards and Trade 
Development Facility.    WT/WGTDF/M/9 
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 32. Turning to  trade capacity-building, which was typically a part of a regional project, there was 
a growing focus on enhancing the competitiveness agenda  and trade facilitation.  He did not need to 
remind Members how important customs was in the da y-to-day trade regimes of developing countries 
and also in relation to an economy's fiscal health .  Bank experience with clients had shown that 
greater efficiency in customs, even when associated with a lowe ring of tariffs, led to increased 
revenues as, for example, had been the case for Peru .  The Bank was also working with low-income 
countries in the context of the Integrated Framew ork (IF) and this was where most activities on trade 
were taking place.  In the last fiscal year, the Bank had spent roughly $500 million on trade facilitation projects and the same amount of expendi ture was budgeted for the next two years.  In 
addition to research and analysis of implementati on costs, the thrust was to provide development 
finance.  In terms of linkages with negotiations, the Bank strongly believed that implementation was a 
critical issue, but from experience they consid ered the benefits far exceeded the costs of 
implementation for trade facilitation.   
33. In conclusion, he said that supply-side constr aints posed relevant challenges for developing 
countries.  WTO negotiations offered opportunities to address some of these challenges, in particular 
to spotlight the issue of implementation and to dr aw the attention of the development community to 
technical assistance needs in this area.  Cooperation in this ar ea and the Coherence mandate helped 
the community decide how to proceed, but country  ownership was important.  An LDC needed to 
prioritise trade issues in the context of its Povert y Reduction Stratgey Papers (PRSP):  the IF and the 
Trade Matrix were important instruments and needed  to be used to explore the debate within the 
context of the PRSPs.  The Bank was willing to help with research and capacity-building in this area.  
34. The Chairman
 noted that supply-side constraints wa s one of the important issues under the 
topic of Coherence before the Working Group and he thanked the World Bank for highlighting the benefits to be gained from successful nego tiations in the area of trade facilitation. 
35. The representative of Zambia
 said that at the last meeting of the Working Group, his 
delegation had offered to submit its  own paper on supply-side issues, but added that the paper was not 
yet ready for distribution.  Nevertheless, he wished to mention some points raised in the paper.  He 
said that there was a strong view, expressed both by the international community and national 
governments, that reducing trade barriers was not enough to provide full development benefits but 
that it needed to be part of a larger developmen t strategy.  That strategy should pay attention to 
structural economic reform and strengthening supply side  response.  It was very evident that the Doha 
Development Agenda (DDA) was imbalanced in favour  of market access, so for poor countries such 
as Zambia, it was hard to benefit due to its lack of  supply capabilities.  However, the preamble of the 
Marrakesh Agreement referred to "the expansion of production of, and trade in goods and services, 
of...," which suggested that the WTO had a role in  terms of supply, as was also demonstrated by 
paragraph 43 of the Doha Declarati on.  Zambia thought it would be sensible for the negotiating bodies 
to establish some sort of supply-side dimension in negotiating rules to ensure a lasting solution.  He 
also recommended establishing some sort of supply- side capacity programme for LDCs in the WTO 
together with other relevant organizations.  Th is could be adopted by the Sub-Committee on Least-
Developed Countries, or by some other WTO body,  and there could then be an annual meeting 
devoted to the implementation of the special progr amme.  To assume that LDCs could benefit from 
market access allowed the imbalance to continue.   
36. The Chairman  remarked that Zambia's comments were  far-ranging  and seemed to apply more 
widely to the Doha Agenda.  He noted that the Group would come back to  the Coherence issue and 
would look forward to examining such a paper if it were submitted to the Working Group.   
37. The representative of Switzerland  requested details about the graph showing efficiency 
improvements in certain countries under trade facilitation. WT/WGTDF/M/9 
Page 8  
 
 38. The representative of Japan
 welcomed the increase in Bank trade capacity-building as an 
element of policy coherence.  She noted that a dverse effects of the phase out of the Agreement on 
Textiles and Clothing could not be solved only by the WTO and looked forward to continued assistance from the World Bank.  With regard to  the IF, she wondered how the trade matrix in 
practice was integrated into the Poverty Reduction Strategy.   
39. The representative of Canada
 thought that the role that the Bank was playing was an 
important one and his delegation was pleased that the Bank had increased its efforts since Cancún in 
support of the Doha Development Agenda.  In c ooperation with the World Bank, renewed efforts 
would be necessary to produce a pro-poor outcome of the negotiations.  He welc omed in particular the 
work on trade facilitation, which had expanded c onsiderably, and the new facility on standards, 
adding that plans to scale up support for infrastruct ure investments were important steps forward.  
Country ownership and a good domes tic environment were key elements and individual countries 
needed to integrate trade issues into their poverty reduction and co re development strategies.  Canada 
believed that Trade Ministries should influence this  agenda.  Without the "bottom-up" approach the 
activities of the Bretton Woods institutions would be limited wit respect to th eir ability to respond to 
country needs.  So trade strategies had to co mplement general progra mmes of economic reform, 
related to inter alia ,  regulatory environment, investment cl imate, transport and customs.  Canada 
looked forward to receiving and commenting on the pape r to be submitted by Zambiat, either in the 
Working Group or in another forum. 
40. The representative of the European Communities , like others, considered the Bank's 
presentation very enlightening and, more broadly, commended the Bank's increasing involvement in 
trade issues, especially as concerned the Integr ated Framework where the EC believed the Banks' 
support and contribution was quite irreplaceable.  He  expressed interest in hearing what was the 
percentage of trade-related activities compared to  overall Bank activities.  As there had been an 
increase over the last few years he wondered what the proportion was.  On trade facilitation, the 
assessment was shared by the EC, especially the fact that there was potential for huge gains in 
revenues from improving customs efficiency.  He h oped to hear further on other activities that went 
beyond trade facilitation, areas relate d to the DDA, especially on eros ion of preferences. and activities 
on cotton and textiles.  He also expressed interest  in the factors behind tariff reduction, autonomous 
liberalization, and on hearing further comment on reasons behind the exhaustion of the import-
substitution model.  Finally, he asked what wa s the Bank's experience on cooperation a nd coherence 
with the WTO and which aspects it might wish to improve and in what manner.   
41. Regarding the Bank's trade support, the Chairman  asked what activities the Bank was 
undertaking on promoting trade liberalization strategies in African countries. 
42. In response to Members' questions, the World Bank representative said that, as an institution, 
the Bank looked forward to new ideas on how to addr ess supply-side constraints.  The concern of how 
developing countries and least-developed countries c ould benefit from the DDA was a major concern, 
and the Bank had undertaken research in cooper ation with the WTO Secretariat, on different 
scenarios.  He referred to a recent conference on th e links between trade and poverty reduction, using 
general equilibrium models.  The results would be available by March and an event would be 
organized to share the results of these studies with WTO Members.  One of the novelties was that data 
now fully took into account systems of preference around the world which allowed research to capture 
the implications of preference erosion world-wide.  In April there would be a seminar, co-sponsored 
by development agencies of Canada and the UK, on the topic of preference erosion where the Bank 
would be showing the latest results of its modelling.  So this topic was very much at the top of the World Bank's agenda. 
43. In response to Switzerland, in the model, whic h, he underlined, was a simplified version of 
reality, customs was related to im ports, not exports, but inevitably by  affecting imports the anti-export  WT/WGTDF/M/9 
 Page 9 
 
 
 bias was diminished.  With respect to the services element of trade facilitation, these referred to 
mainly telecommunications and e-commerce activiti es supporting trade, described in the paper and 
available on the Bank's website.  With respect to th e IF, efforts to bring trade issues into the PRSPs 
would be helped by increased capacity building and w as a work in progress.  The Bank's definition of 
trade facilitation went well beyond Articles V, VIII  and X of the GATT.  The Bank was dealing with 
infrastructure issues associated with  trade and the implications for development went well beyond 
trade.  For instance, truck drivers were often cons trained at the border which affected projects that 
focused on HIV/AIDS.  Typically, there were some $20 billion of loans and credits and the trade-
related agenda was $1 to 1.5 billion dollars, but it depended on how one defined trade-related 
activities.  The Bank was active in the area of co tton within the PRSP, and the WTO Secretariat had 
received information.  With regard to the exhausti on of the import-substitution model, every barrier to 
import created an anti-export bias, so many countries had realized that this needed to be addressed in 
pursuit of greater integration with the world econo my.  The Coherence agenda was an important one 
for the Bank and its President had participated in both of the General Council meetings on Coherence.  
In his view, what could be improved was the entir e dialogue, transparency, and sharing information 
on what was being done.  The Bank had an excellent re lationship with the WTO;  joint seminars were 
held frequently;  the work on preference erosion wa s being carried out in close cooperation with the 
WTO research staff,  and seminars on services were being conducted.  There was even more to be done since it was a very broad agenda.   
II. WORK PROGRAMME FOR 2005 
44. The Chairman recalled that the Group's report to the 6th Ministerial Conference had to cover 
eight areas.  Trade financing had already been c overed at the Group's meeting in April, trade and 
financial markets at its meeting in October, and asp ects of the coherence di scussion had been covered 
at the present meeting.  There remained five more areas for discussion, and further discussion under 
coherence.  The drafting of the report should be kept  for the second half of 2005 since this could be a 
time-consuming exercise.  There were therefore two meetings before the summer break.  The first 
meeting could be used to address external liberalizat ion and internal reform and to continue with the 
discussion on coherence.  This would leave a clus ter of directly trade-related issues:  trade 
liberalization as a source of growth, WTO rules and financial stability, and the importance of market access and the reduction of other barriers in the DD A negotiations, and external  financing, commodity 
markets and export diversification.  On the latter issue, the Chairman  said he intended to coordinate 
with the Chairman of the Committee on Trade and Devel opment in order to avoid duplication.  At this 
stage, he wondered whether Members had any specific papers or proposals to submit on these issues.  
There were no interventions made on this issue. 
III. ANNUAL REPORT 
45. The Group adopted
 the draft Annual Report on the understa nding that it would be revised to 
take account of the discussion at the present meeting.4 
__________  
 
 
                                                      
4 The final report was issued as document WT/WGTDF/3.