TWN Info Service on Finance and Development (Oct08/05)
Concerns over financial crisis surface at TNC meeting
In the response from WTO members during the informal TNC meeting, almost all those who spoke mentioned the financial crisis as having an important bearing on the WTO, and said that the WTO should guard against countries resorting to trade protectionism during the difficult times.
However, while some countries such as Mexico and Chile advocated further liberalisation through the Doha agenda as the solution, other countries such as Bolivia, Bangladesh South Africa, and Venezuela were cautious about the role liberalisation could play.
to trade diplomats, major players such as the
Speaking at the informal TNC meeting, WTO Director-General Pascal Lamy said "We are meeting at a time of global financial crisis. This gives added importance and urgency to our work here."
Noting that the financial crisis may be having an impact on developing-country access to financing of imports and export, Lamy said that he is convening a meeting of the major providers of trade finance on 12 November to examine this issue and find ways to alleviate the situation if it was to deteriorate.
Trade officials said that there was wide acknowledgment at the informal meeting that moving forward with the agriculture and NAMA modalities was the best thing that could be done. There was quite a lot of support for the notion of the multilateral bottom-up approach through the negotiating groups, which members welcomed.
The members that spoke also stressed the need to avoid sliding into protectionist measures. Some said that the financial crisis is the result of overly extensive deregulation or lack of regulation in the markets, said trade officials, adding that everyone who spoke stressed their concerns about the financial crisis. Many developing countries said that they would be the ones hardest hit by this.
In his statement at the TNC, Lamy said that the WTO has over 60 years of solid experience in regulating trade opening. At a time when there are renewed calls for a better regulation in the financial area, the WTO system provides an example of how the lessons of history and experience have led to the construction of a system of international governance.
"And we have an opportunity to send a signal of our desire to strengthen it by concluding the Doha Round," he said.
Stressing that the collective commitment to the Round remains strong, Lamy nonetheless said "... it is clearly necessary to face the reality that [the] Round cannot be concluded this year. However, I believe it is still possible to reach agreement on modalities and the Ministers with whom I have spoken are all determined to push ahead."
Looking back in history, said Lamy, "we can see that the type of uncertainty which is now infiltrating the international scene can be a precursor to rising protectionist tendencies. Rising barriers at the frontier, starting with barriers to trade in goods or services, is often a tempting political option under such circumstances."
"The role of the WTO as a firewall against protectionist responses is thus vital," said Lamy, adding that "it is not so much about any direct effects on markets as for sustaining confidence in global cooperation and institutions."
financial crisis may also be having an impact on developing country
access to financing of imports and exports, the Director-General said,
pointing out that just this week
Lamy announced that he has convened major providers of trade finance to a meeting on 12 November to examine this issue and find ways to alleviate the situation of it was to deteriorate. This will be followed up in the Working Group on Trade, Debt and Finance at the end of November.
If there are indications that the financial situation could be having serious implications more generally for trade or the trading system, Lamy said that he will consult with the General Council Chairman on the possibility of convening a General Council meeting on the coherence mandate.
(In a letter to invitees to the 12 November meeting, Lamy said that the purpose of the meeting will be to review how the international market for trade financing is faring in view of the current very difficult conditions on international financial markets, and to examine how to maintain and improve the availability and accessibility of trade finance facilities at affordable rates for developing countries, especially low-income countries.
(Among the invitees are the Managing Director of the IMF, the President of the World Bank, the President of the Inter-American Development Bank, the President of the African Development Bank, the President of the Asian Development Bank, the President of the European Bank for Reconstruction and Development, the President of the Islamic Development Bank, as well as Citigroup, Commerzbank, Royal Bank of Scotland, JP Morgan, and HSBC.)
"Apart from the financial crisis, there are other external influences which are tending to affect our work here, or perhaps the optimism with which we are investing ourselves in it," said Lamy. "Maybe, any of these factors could provide an excuse to be tempted to throw in the towel, but in fact the reverse is true: they are all the more reason to do the deal rapidly."
Citing the G7 senior officials' meeting two weeks ago, Lamy said that they made some progress, but not yet enough to contribute possible solutions on key issues. Noting that the main item on their agenda was the SSM in agriculture, Lamy said "It is, of course, important to resolve this question, but we all know it is not the only issue in Agriculture, and Crawford [agriculture chair] has now taken up the gauntlet again in this area."
There are also key issues in NAMA and the other areas of negotiation which will need attention, he said.
All the negotiating groups have programmes of meetings and consultations over the coming weeks, said Lamy, adding that agriculture and NAMA remain key to further progress across the board.
"We do not have much time available - the end of the year is approaching rapidly. Work will continue in the Negotiating Groups over the next few weeks, and any ministerial involvement which might be necessary will take place when the moment is right," said Lamy. "There should be no doubt - we are working on Plan A, establishment of modalities. Our chances of achieving our goal are clearly less than they were in July, but they are still good enough to warrant a major effort."
to trade officials, the Chair of the agriculture negotiations, Ambassador
Crawford Falconer of
Falconer said that members are focussing most of the time on areas of the greatest divergence - Special Safeguard Mechanism (SSM), and sensitive products. With respect to the industrial countries, it is tariff quota creation. He said that tariff quota creation and tariff simplification were the areas in July that offered the starkest contrast because they were binary in terms of the possibilities there. He said that in addition to these issues as well, discussion would be on cotton, and Green Box.
The Chair said that people were engaged and he detected some progress. On the question of tariff simplification and tariff rate quota creation, Falconer said that people were going beyond the simple binary response of yes or no, and looking at compromises and ways to move forward. That said, people were not abandoning positions.
Falconer announced that he would continue with his work, and have an informal open-ended meeting (of the full membership) next Wednesday in which he will lay out in more detail what his "walks in the woods" consultations have generated.
Chair of the NAMA negotiations, Ambassador Luzius Wasescha of
He said that he will be focussing on consolidating several textural aspects. He added that maybe after the consultations, the presence of experts and decision-makers will be required in November.
Several countries spoke following the reports of the Director-General, and the agriculture and NAMA Chairs.
to trade officials,
It said that the financial crisis will affect the external imbalances of developing countries, especially net-food-importing developing countries. It added that import and export financing will be affected more profoundly in developing countries. Expressing concerns about the single undertaking, Lesotho said that perhaps for LDCs, it would be good to have an early harvest of the LDC provisions particularly given the difficulties we are having economically at the moment. There would be no real impact of an early harvest for LDCs, either on the industrialized countries or the emerging economies.
It said that the specific circumstances of the global economy must be considered particularly as they pertained to the LDCs.
The African Group expressed worry about the contagion of the financial crisis into the real economy, and the impact this may have on developing countries and trade. It said that these concerns are already being seen about unemployment, and there will be an imbalanced impact of the crisis on developing countries. The Group supported the Director-General's efforts on the trade and finance initiative.
The events of recent weeks in terms of the markets will result in a new world economic order and an end of laissez faire policies. There is a need for regulation, it said, adding that the WTO needs to send a message to financial markets that governments can work together and take a powerful stance in favour of stability.
must take the development dimension into account. It should be the heart
of the work programme, said
Hong Kong-China said that it was fully committed to a successful conclusion. It wanted modalities by the end of the year.
Bolivia, represented by its senior capital-based official, Pablo Solon (who is trade advisor to President Evo Morales), said that although almost everyone expressed worry about how the financial crisis is like a tsunami, it would appear that there is yet change at the WTO, which has the same agenda as if the financial crisis has not affected the Doha agenda. He agreed that we have to guard against a revival of protectionism, but he added that further liberalisation is also not the solution, especially with regard to services and within that, financial services.
Mr. Solon said that the WTO must learn from the reality of the crisis and that the WTO should take into account this crisis and change, if it does not want to end up like the IMF which did not change and which now has only a marginal role in the financial crisis.
stressed that the WTO must change the
the financial crisis, Bangladesh said that there is concern, not strictly
about enhancing market access, but about simply hanging on to the existing
levels of market access that are currently in evidence today.