[stop-imf] World Bank/IMF to emphasize trade in structural adjustment

[Robert Weissman]

Title: TRADE-FINANCE: World Bank to Exploit Trade for Structural Adjustment

Analysis by Abid Aslam

WASHINGTON, Apr 23 (IPS) - The World Bank will intensify its efforts to
open borrowing countries to foreign investors by using trade as a lever,
according to an internal document to be discussed by development and
planning ministers next week.

'Leveraging Trade for Development: The World Bank's Role' is to be taken up
by the Bank's policy-making Development Committee on Apr. 30. Ministers are
expected to endorse the document, which laments that protectionism among
rich countries ''imposes costs on developing countries that exceed aid
flows''.

Because the Bank has no role in setting the trade policies of its more
powerful shareholders, however, the document trains its sights on poorer
nations, where it says it will exploit ''overlap of the new trade
activities with ongoing sectoral reform programmes''.

In practical terms, this means adding the arrow of trade to the quiver of
arguments used to persuade borrowing countries to toe the Bank's line when
drawing up national economic plans.

''The Bank will have to weave country activities to promote trade
integration into the whole cloth of the Bank's country assistance
strategy,'' the paper states. ''For low-income countries, trade policy is
progressively intended to be a central part of the Poverty Reduction
Strategy, jointly assessed by Bank and [International Monetary] Fund staff.''

Ostensibly, the Bank is concerned with harnessing trade to generate
''pro-poor growth''. The 26-page paper, however, provides only three
passing references to what this might entail. It states, ''a next priority
of the Bank is to identify the effects of reforms on the poor, design
targeted compensatory programmes where possible, and help countries build
in pro-poor growth programmes through advice.''

Although the document contains such scant and vague references to the need
to compensate the poor when they are harmed by liberalisation, it argues at
length for the virtues of trade as an engine of economic growth.

As such, the Bank appears to have three aims. First, it wants to show that
its policy loans, which finance structural adjustment, can improve
borrowers' trade performance. This comes as the Bank seeks to reverse a
decline in lending by expanding policy loans. Among the reasons for this,
says Njoki Njoroge Njehu, director of the activist network Fifty Years is
Enough, is that policy loans seldom are subject to the scrutiny and
protests visited upon traditional projects, such as dams or mines, which
tend to have easily- anticipated harmful effects on the poor and the
environment.

Second, the Bank wants to strengthen its hand in shaping national
policy-making in low-income countries. The latest push for liberalisation
forms part of ''the rebirth, or second coming, of structural adjustment
lending,'' says Nancy Alexander, a veteran Bank watcher and director of the
non- governmental Globalisation Challenge Initiative. Structural adjustment
loans are cheaper for the Bank to make and administer than are project
loans, she adds.

Third, the Bank wants to shore up the World Trade Organisation (WTO)
against dissent from some developing countries. The document acknowledges
this dissent, which mainly comes from borrowing countries that want
problems inherited from the Uruguay Round of trade talks fixed before
turning to new proposals.

Nevertheless, the paper expects that a new round of comprehensive trade
negotiations will be launched in November, at the WTO ministerial
conference in Qatar.

By committing the Bank to help countries join the global trading system,
the document also appears designed to win support for the WTO among
planning and development ministers next week, and thereby to isolate those
developing country trade ministries that are sceptical of the existing
multilateral agenda and institutions.

The Bank manoeuvre follows similar attempts at the WTO. Last year, the
trade body bypassed African missions at its headquarters in Geneva and
sponsored a meeting in Gabon of regional trade ministers in an unsuccessful
bid to win their agreement to launch a new trade round in Qatar.

Now, Egypt and South Africa reportedly are trying to mobilise support for a
new round, and again developing countries' trade representatives complain
they've been kept in the dark.

The World Bank paper concedes that ''the traditional WTO approach of
developing common rules may not be appropriate in several areas'' where
implementation is costly and capacity weak. Although it does not elaborate,
these areas might include sanitary and phytosanitary rules, which have
blocked poor nations' shrimp exports to Europe.

However, the Bank is adamant that investors' rights are not up for
negotiation. The WTO's approach, it asserts, ''remains as valid as ever in
areas such as the principles of non-discrimination and national
treatment'', meaning that governments must not show any preference for
domestic investors.

This is necessary, the Bank argues, because trade is growing fastest not
between countries but among the scattered subsidiaries of multinational
corporations. ''If restrictions on foreign ownership are not lifted
concomitantly with trade reform, one source of potential investment in
exports is closed off,'' it says.

Promoting investment, it adds, will involve adherence to its policy
prescriptions. These include ''regulations that achieve public purposes
with minimal distortions in incentives. That is jargon for privatisation
and re-regulation of public goods and services, including pension funds and
domestic savings that, in the Bank's view, could be put to productive use.

The Bank also wants to ensure that regional trade blocs ease the way for
broader multilateral integration. Earlier this month, it approved 110
million dollars in soft loans for a regional trade project involving the
Common Market for Southern and Eastern Africa.

The effort is designed in part to pre-empt the kind of political maelstrom
into which the Bank was sucked in the 1990s, when it railed against Latin
America's Southern Cone common market, or MERCOSUR, for distorting
international trade and investment flows by erecting barriers against
non-members.

MERCOSUR members defended it as nurturing domestic industries and jobs, and
lashed back at the Bank for seeking to undermine it at the behest of the US
government.

Seen from Washington, where the Bank is headquartered less than a minute's
walk from the US Trade Representative's office, MERCOSUR remains a spoiler
at the WTO and in hemisphere-wide free trade talks. According to one Bank
trade specialist, the institution learned that the best way to ''avoid
future MERCOSURs is to steer regional integration processes from early
on.'' (END/IPS/IF/aa/da/01)