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DEVELOPING COUNTRIES NO TO WTO'S EXPANDED 'COHERENCE' ROLE

by Chakravarthi Raghavan


Geneva, 5 Nov 99 -- Developing countries opposed Friday proposals in a draft Ministerial declaration for Seattle that would expand, beyond what is envisaged in the Marrakech Ministerial Declaration of 1994, the relationships between the IMF, World Bank and the WTO under the rubric of "coherence".

After the conclusion at official level in Dec 1993 of the negotiations, the then GATT Director-General, and the IMF, came up with an elaborate and ambitious concept of "coherence" of the Fund, Bank and the WTO whose real effect would have been an overlordship over the developing and transition economies.

The three organizations continue to invoke Bretton Woods so as to claim legitimacy from the post-war order and concepts of the Bretton Woods agreements (of the IMF and the World Bank) and the Havana Charter -- even though they are now far far away from these concepts.

In the post-1973 order, when the Bretton Woods system collapsed, the IMF lost any role or influence over the industrialized countries and has been an instrument of the major industrial nations, particularly the US. It has been influencing through its conditionality loans the economic policies of developing and transition economies, as has been the Bank with its 'finance' for structural change.

But since the influence and control of the IMF and the Bank over the developing countries and economies in transition lay through conditionality, when countries borrowed, they sought to join forces with the WTO, to use the rules to exercise greater conditionality, and get WTO secretariat's advice on areas where the developing countries could be forced to move more via the conditionality loans.

The GATT/WTO also thought that it could join with the Fund and the Bank to become the new Trinity of the market.

But somewhat late, the developing countries woke up to this, and said that coherence in policy had to be by decisions of governments and not the secretariats.

Nevertheless, during the financial services negotiations of 1997, the WTO and its head used the IMF to prod several of the developing countries of Asia to be more forthcoming in concessions to the US and the EU. And after the Indonesian crisis of 1998, there was an attempt to provide 'technical advice' and persuade Indonesia to notify the WTO of all the 'liberalisation' measures taken as a price for IMF loans.

There have been similar, though less blatant attempts, in Africa and Latin America.

The opposition of developing countries to the expanded scope of the "coherence" is due to this.

Even more, the US and the EC have recently joined to suggest that coherence should go beyond the IMF-World Bank-WTO relationships, and should include 'other' international organizations.

Though not spelt out (by the US, EU and others who have proposed this), the somewhat lengthy formulations, in some deliberately woolly language, on this subject (in paras 61-63) has been seen as a back-door attempt to bring in the ILO and labour standards into the WTO, as also the UNEP and environment standards.

In the informal HOD, the Philippines called for deletion from the chairman's text of all the formulations that went beyond the coherence decision at Marrakech.

The Philippines view was supported by a range of countries - Egypt, Malaysia, Pakistan, Nigeria, Brazil, India, Uganda, Bolivia, Uruguay, Morocco, Honduras, Indonesia.

Brazil said the text should merely recall the Marrakech declaration and ask the heads of the three organizations to pursue cooperation and report back to their members.

With some nuances, the text and enhanced coherence and cooperation was supported by the EC, Canada, the US and other industrialized countries.

The General Council chairman, Amb. Ali Mchumo noted at the end that a large majority of the members clearly did not favour the lengthy formulations and expanded mandate.

There were further responses from developing country members reiterating their opposition, with Pakistan saying that the references to 'other international organizations' appeared to be an attempt to bring the ILO and labour standards into the WTO, and they would reject it.

The informal HOD then began discussing the issues relating to electronic commerce and the standstill on tariffs. The discussions are to continue into Saturday. (SUNS4546)

The above article first appeared in the South-North Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief Editor.

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