Recommends creation of self-governing Global Trade Facility with funding "additional to existing commitments;" says aid for trade "must be quantified and committed to" in agreements resulting from Doha round of negotiations
Financial assistance to help poorer nations cope with increasingly open world trade - a concept known as "aid for trade" -- should be expanded, quantified, and guaranteed by industrialized countries, the 2001 Nobel Laureate in economics said this morning.
Joseph E. Stiglitz, a Professor at Columbia University and Executive Director of the Initiative for Policy Dialogue, said commitments to provide such aid should be included in the outcomes of the current Doha round of international trade negotiations, and should be made binding and enforceable through the World Trade Organization - a controversial step he said was necessary because rich countries have sometimes failed to follow up on previous promises of such aid.
He was speaking before a two-day joint meeting of UNCTAD and the Commonwealth Secretariat on the issue of aid for trade. UNCTAD Secretary-General Supachai Panitchpakdi told the meeting that aid for trade should act as a complement to the Doha round and not take away from it. "We must be aware of the politics of negotiations. UNCTAD has tried to stimulate discussion and hopes this exchange will influence the direction of the aid for trade initiative."
Prof. Stiglitz also recommended the creation of a self-governing Global Trade Facility (GTF) through which aid for trade would be targeted and delivered to developing countries. Such a facility should set aside 16 of the 24 seats on its board for low- and middle-income nations. The GTF could directly bring a charge of non-compliance through the WTO against any industrialized country not meeting its financial commitments, he said. He recommended that programmes under a GTF, if established, should have a high degree of "country ownership" and private-sector involvement.
The UNCTAD/Commonwealth Secretariat session was called after December´s WTO Hong Kong Ministerial Conference requested the WTO to "operationalize" aid for trade. WTO Director-General Pascal Lamy has appointed a task force to look into the matter, consult with relevant international organizations, and issue recommendations by July. The Hong Kong Ministerial Conference was an effort to break long-running impasses in the Doha trade talks.
Developing countries at this week´s meeting said among other things that completion of the Doha trade negotiations has been stymied by deadlocks over reducing agricultural subsidies provided by rich nations to their farmers, and by concerns among poorer countries that domestic firms and national trade infrastructures may not be ready for the unbridled international competition they will face if protective tariffs and other barriers are removed. Many least-developed countries (LDCs) are further worried about losing preferential trade terms they now enjoy for exports to markets in the United States and European Union.
Aid for trade is seen as an important contribution to the development objectives of the Doha round and to achieving progress in the talks. It can be regarded as a "negotiating side payment" through which rich countries offer financial assistance "as a sweetener to keep developing countries at the bargaining table," Prof. Stiglitz said.
But he said its real importance is as a "complement to market access" - that is, as aid to help poor countries overcome the internal difficulties they face in bringing competitive products onto world markets. "Market access is not enough," Prof. Stiglitz said, noting that aid for trade is needed to help developing countries strengthen weak infrastructures, increase supply capacity, meet the high product standards that prevail internationally, overcome poor access to credit, develop good environments for business, expand business knowledge and technology, and design effective trade policies. Trade liberalization also imposes proportionately larger adjustment costs on poor nations than on rich ones, he said.
Prof. Stiglitz remarked that the previous Uruguay round of WTO negotiations "tilted the playing field" in favour of rich countries, and the current Doha round, to reach a conclusion, has to be seen to be levelling it.
He stressed there must be a "maintenance effort commitment" to aid for trade, and that funding for it must not be at the expense of other aid programmes.
Aid for trade currently reaches developing countries through several channels, including the Integrated Framework for Technical Assistance to Least Developed Countries (IF). Prof. Stiglitz said the six agencies which now run the IF, UNCTAD among them, could serve in an advisory capacity to a Global Trade Facility, if such an institution is created.
Jean-Pierre Chauffour, the representative of the International Monetary Fund in Geneva, said the IMF had several "doubts on the specifics" of Stiglitz´s proposal. He said aid for trade "is not part of the Doha-mandated market access agenda," that "the WTO is not a development agency," and that "linking the amount of aid for trade resources directly to the negotiations on market access will trigger undesirable tradeoffs and lower the round´s level of ambition." He termed the proposal to make aid for trade commitments enforceable through the WTO "unrealistic."
Bernard Hoekman, a representative of the World Bank, responding to Prof. Stiglitz´s proposals, said among other things that "Aid for trade is not a quid pro quo per se, but a key step to enable developing countries to use the opportunities that trade liberalization provides, something that should be pursued even without WTO and the Doha round."
Prof. Stiglitz´s speech was based on report presented to the two-day meeting and written by him and Andrew Charlton, a Research Officer at the Centre for Economic Performance of the London School of Economics.
