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Seattle WTO Talks Must Focus on Poor

World leaders gathering in Seattle this week must ensure that the world’s poor become full partners in the potential gains from world trade, World Bank President James D. Wolfensohn says in remarks prepared for delivery tomorrow at the Third Ministerial Meeting of the World Trade Organization (WTO).

“It makes no sense to urge poor countries to reform their economies, to urge them to compete and ‘pay their way in the world,’ while denying them the means to compete. We must seize the day, and work flexibly and creatively towards a world trading system that really makes a difference for developing countries,” Wolfensohn will say in his speech Tuesday at 7 pm PST.

In his speech, Wolfensohn urges wealthy nations to eliminate trade barriers for the sake of the three billion people who live on less than $2 a day. Manufactured goods exported from developing countries to the industrialized world face barriers four times higher than those from industrialized countries. At the same time, barriers blocking manufactured goods flowing between developing countries are even higher.

Agricultural protectionism in high-income countries is especially a problem for the poor. Trade expansion in agriculture has lagged far behind that in manufactured goods and agricultural protection in rich nations—even after the reforms of the Uruguay Round—causes annual income losses for developing countries of nearly $20 billion a year.

“A number of developing countries have been very successful in competing in world markets but they are a small minority,” he says. “Granting access may be temporarily tough for protected industries in developed countries, but in the long run it will benefit us all. It will contribute to the peace and security we surely all seek. We cannot afford to compound the old division of rich versus poor countries with a new division between the successful few and the marginalized many of the developing world.”

Wolfensohn also calls on wealthy nations to make upcoming WTO talks more inclusive for the world’s poorest countries, many of whom lack representation at the body’s headquarters in Geneva. The Bank is currently working in this area through the WTO 2000 project, with support from the Netherlands and the UK.

“We must work collaboratively to support the capacity of the poorest countries to participate in international trade negotiations. Not just to be at the table but to have a voice, and to be heard,” he says.

World Bank research presented at a recent WTO conference in Geneva shows that there is great scope for developing-country gains from liberalization.

Abolition of agricultural export subsidies and achievement of sharp cuts in import tariffs would benefit most developing countries. Bank research suggests that a 40 percent reduction in agricultural support policies globally would contribute almost exactly the same amount to global welfare as a 40 percent cut in manufacturing tariffs. This reflects the huge size of distortions in agriculture relative to manufacturing, despite the fact that manufacturing value added is two-and-a-half times that of agriculture globally.

The research suggests, contrary to conventional wisdom, that developing countries would get over three-quarters of the global gains from cutting protection on manufactured goods. This reflects the impressive expansion that has occurred in exports of manufactured goods from developing countries. Much of the gains from reducing trade barriers would be associated with expansion of South-South trade in manufactured goods.

Helpful link: To learn more about the World Bank’s work on trade and other material of interest in the runup to the Seattle WTO talks, visit http://www.worldbank.org/trade.

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