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Hidden Makers of the Global Trade System? - Social and Economic Policy - Global Policy Forum The World Bank and the IMF:
Action Aid
Hidden Makers of the Global Trade System?
Center of Concern
Environmental Defense
September 12, 2003As Trade Ministers from WTO member countries gather in Cancun for the WTO 5th Ministerial (September 10-14), it is important that the World Bank and the IMF take their share of responsibility for a trading system that is putting increasing pressure on the world’s poor and the global environment which sustains life on this planet.
The Cancun Ministerial takes place amidst massive protests by activists and NGOs from around the world who are exposing the non-transparent decision-making process of the WTO and its trade policies that are condemning a growing share of the world’s population to slow and erratic economic growth while eroding the Earth’s natural life-support systems. These policies fail to take into account the rising inequality, social disruption and the depletion of the world’s natural resources which they entail.
However, long before the current round of negotiations, euphemistically named the Doha Development Round, the World Bank and the IMF were key actors shaping the international trade system, and they continue to be so today. Over the past decades, the IMF and the World Bank have systematically promoted controversial policy reforms in developing countries. Typically these include liberalization of trade and financial flows, deregulation, privatization and fiscal austerity. Since the establishment of the WTO, under the rubric of achieving greater "coherence," the three organizations have embarked on a formal partnership geared towards having a joint economic policy approach.
Structural and sectoral adjustment loans have been the main instruments by which the World Bank and IMF have supported, for many years, trade liberalization, deregulation and other policies aligned with the goals of the WTO. According to Rick Rowden of Action Aid USA: "It is the same misguided and failed policy reforms promoted by the World Bank and IMF which are being progressively locked-in through WTO trade law backed by the threat of economic sanctions."
But adjustment loans are not the only instrument by which these institutions shape the trade policies of the developing countries. The most pervasive influence comes through their near-monopoly over development policy research and the design and provision of trade-related technical assistance programs.
According to a survey, 84 % of policy-makers in developing countries tend to rely on World Bank policy research and analysis for designing their policies. The World Bank has sought to position itself as the "Knowledge Bank", because of its purported capacity for "high-quality" data-gathering and analytical capacity. However, the methods and models that are used for data-gathering and analysis are never politically neutral. World Bank research, especially the reports that need to be institutionally endorsed, are invariably tainted by the ideological belief on the tenets of neoliberal orthodoxy. For instance, an annual World Bank report released a few days before Cancun, the Global Economic Prospects, asserts that a successful outcome in Cancun would enable 144 million additional people to escape from poverty by 2015. Aldo Caliari, from the Washington-based Center of Concern, says: "When you see those figures being thrown out you can’t help but recall the Bank figures that predicted huge income gains for developing countries coming out from the Uruguay Round. And then, what happened? The Bank research machinery is at the service of one thing: torture the numbers until they confess what the interests of the most powerful members want them to confess."
A further problem is that an increasing share of World Bank and IMF financing is going to trade-related technical assistance programs. Portrayed in the benign light of projects to "help" developing countries "take advantage of the opportunities" brought by globalization, these programs tend to focus on teaching developing countries how to live with the existing trade rules and policies, rather than on how to negotiate better ones. They are also underpinned by ideological assumptions about the benefits of liberalization, and driven by the interests of the countries that provide the funding for them. The main existing vehicle to catalyze technical assistance funding from donors and international financial institutions, the Integrated Framework, is led by the World Bank. While fourteen countries are already at different stages of using it, the first generic evaluation of the Integrated Framework has been poorly defined, carried out in haste and lacked even the minimum degree of openness that could have provided it with some credibility.
"Coherence in international policy-making is indeed desirable," states Korinna Horta of Environmental Defense, "but it is coherence of international economic and trade policy-making with considerations of environmental sustainability, social equity and human rights." This is the alternative kind of coherence that social and environmental activists gathered in Cancun seek to discuss.
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