Trade and Poverty Reduction in the 21st Century

OECD Observer

OECD Forum, 15th May, 2001: Keynote address “Openness and the Challenge of Poverty Reduction in the 21st Century”; Speaker: Michel Camdessus; moderator: Michael Roeskau 

Trade and poverty reduction go hand in hand but if further trade liberalisation is to be achieved countries will need to address also the whole question of global governance, former IMF managing director Michel Camdessus said on Tuesday, May 15. If the world’s trading nations are to be any more successful in global talks in Dohar in November than they were in Seattle in 1999, when they failed to agree on new negotiations, they will have to take this into account, Mr. Camdessus told the OECD’s Forum 2001 on Sustainable Development and the New Economy.

“The ultimate systemic threat today is poverty,” Mr. Camdessus said, citing former Mexican finance minister Angel Gurría. Openness in trade must be perceived as integral to a growth policy centred on poverty reduction, and only if a new cycle of trade talks is seen as a prerequisite for sustainable development in all developing countries will it have any chance of success.

He noted that World Trade Organisation director general Mike Moore has said that if OECD countries cut barriers to trade in agriculture, services and manufactured goods, it would boost the world economy by $613 billion – the size of the Canadian economy, while the removal of such barriers would boost growth by nearly $1.9 trillion – twice the size of China. (See article by Mr. Moore in OECD Observer 226/227).

Mr. Camdessus said that to avoid a repeat of Seattle, all players must realise that issues that go beyond the sphere of trade cannot be resolved by trade ministers – or indeed any other kind of minister – alone, and that the approach to trade negotiations inherited from the General Agreement on Tariffs and Trade (GATT), with its concession bargaining and ‘green room’ restricted discussions has had its day.

In addition, the key systemic issues we face cannot be reduced purely to their trade or financial dimensions but must be seen in a social context., while any trade round must be looked at not just from the perspective of trade balances, but also from the viewpoint of a global development policy.

And developing countries are now aware that there can be no significant trade agreement without their effective participation and commitment.

“We need to stop talking about a trade round with a focus on development and instead seek a development policy based on open trade,” he said. If a new round is launched it must take the above points into consideration. Developing countries must be in the driving seat and must reassess their politics in the context of sustainable development. It is up to the industrialised countries, however, to provide the financial and technological assistance to ensure that the costs do not further disadvantage the developing world.

But this is still not enough. Mr. Camdessus said that we need to look at world governance, often a ‘taboo’ subject. A body is needed to arbitrate between various powerful interests, which is seen as legitimate and fairly representative of all countries, North and South. He stressed that this was totally different from the G7 habit of inviting selected countries to meet with them depending who was fashionable at the time. He also stressed he was not advocating world government, but world governance. A simple way would be for the ministerial meetings of IMF and World Bank members which occur every year to be upgraded to head of state and government level.

The question of global governance also requires rethinking the responsibilities of existing international institutions, Mr. Camdessus said. For instance, the WTO should not be asked to go beyond the remit of its charter to deal with labour standards when that is the work of the International Labour Organization (ILO). Rather the ILO should be strengthened and take responsibility for implementation of core labour standards. Also, to make the United Nations more credible, we have to strengthen its capacity to act on the environment. And of course, as underlined by a question from the floor, it is essential that people in both developing and industrialised countries are educated so that they can support the political leaders in their call for change.

To conclude, Mr Camdessus repeated his conviction that trade, development, the environment and world governance are linked. We must continue to develop this link on an institutional level. “Do not forget that it is not just a question of getting more growth from trade liberalisation but more higher quality, fairer growth, governed by a more legitimate decision making process.”

In response to questions from the audience, Mr Camdessus further explained that by fairness he did not mean redistributing skills, but removing existing regulatory settings which act as artificial obstacles to trade, and ensuring that each country’s views are heard, irrespective of its size or geographical location.

©OECD Observer May 2001

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