EuropaWorld 9/11/2001 Importance to Poor Countries of Trade Talks Highlighted by New World Bank Report

A new World Bank report paints a grim picture of the short-term economic outlook for poor nations. Simultaneous downturns in the US, Europe and Japan will result in developing country growth falling to 2.9 percent in 2001, only just over half the level recorded the year before. Latin America, East Asia, and Sub-Saharan Africa are being particularly hard hit. Nonetheless, if industrial countries begin to recover by mid-2002, growth in developing countries should pick-up again in 2002.

These sober conclusions are contained in 'Global Economic Prospects and the Developing Countries 2002: Making Trade Work for the World's Poor', the World Bank's yearly report on prospects for developing countries.

On top of the slowdown have come the terrorist attacks whose knock-on effects are expected to a widespread depressive influence on economic prospects almost everywhere.

However, removing barriers to trade, the topic of current WTO meetings in Doha, could boost the long-term prospects of developing countries significantly, the report suggests. Reshaping the world's trade system and reducing barriers to trade could accelerate medium-term growth and reduce poverty around the world, it concludes.

Expanding trade could well increase annual GDP growth by an additional 0.5 percent over the long run. By 2015 this could lift an additional 300 million people out of poverty over and above the 600 million who should be helped on current growth rates. Developing countries stand to gain an estimated $1.5 trillion of additional income in the 10 years after liberalisation policies are begun while developed countries would see their incomes rise by some $1.3 trillion, the Bank says.

"To make this happen, the developed countries have to be willing to put agriculture and textiles on the negotiating table because those are the products that the world's poor produce," says Uri Dadush, Director of the World Bank's Economic Policy and Prospects Group. "A round that brings down barriers in agriculture, advances the timetable on textiles, and agrees to curtail antidumping at the same time as it takes up the concerns of the industrialised countries, has the potential for being a true 'Development Round.'"

Trade matters more in today's integrated world than ever before, argues Richard Newfarmer, principal author of the report. "The terrorist attacks put a huge drag on the already sputtering engines of the global economy. What makes this situation unusually risky is that this is the first time since 1982 that the US, Europe, and Japan have all turned down at the same time. As a result, growth in trade in 2001 has undergone one of the severest decelerations in modern times - from 13 per cent in 2000 to perhaps 1 per cent in 2001. Developing countries are confronting a 10 percentage point drop in the growth of demand for their exports, seriously undermining their growth this year. On the upside, the volume of world export growth is expected to pick up to 7.2 per cent over 2002-3."

The report proposes a four-part policy agenda to reshape global trade architecture to promote development: launching a Development Round in the WTO, promoting global co-operation to expand trade outside the WTO, encouraging new policies in high income countries to provide assistance that will expand trade, and advocating for trade reforms within developing countries to accelerate development.